great eastern holdings limited annual report 2012
TRANSCRIPT
GREAT EASTERN HOLDINGS LIMITED ANNUAL REPORT 2012
Bringing “More to Life” is the essence of what we continually strive to do. At Great Eastern, we aspire to deliver greater value to lives and impact our community in vibrant and meaningful ways.
As a LIFE company, we believe in engaging, enhancing and emboldening the lives of the people that matter most to us – our customers, distribution representatives, employees, partners and other stakeholders – so that they may Live Great and in turn enrich the lives of others.
LIVE GREAT
1GREAT EASTERN HOLDINGS LIMITED
2 ANNUAL REPORT 2012 [ MORE TO LIFE ]
OUR MISSION
OUR VISION
OUR CORE VALUESIntegrityInitiativeInvolvement
ETHOS
CONTENTS
Malaysia
Emerging Markets
3
Market capitalisation
S$7,4121
million
Distribution per share
642
Economic value of one year’s new business
S$353million
Embedded value
S$8,605million
Total assets
S$59,701million
Shareholders’ fund
S$4,797million
Gross premiums
S$6,615million
to shareholders
S$1,189million
KEYFIGURES
4 ANNUAL REPORT 2012 [ MORE TO LIFE ] 5GREAT EASTERN HOLDINGS LIMITED4 ANNUAL REREEPOROPORORORRRPORRRRRRRRRRRORRRORRRRRRRRRRRRRRRRRRRRRRRORRRRRRRRRRRRRRRTTTTT 2T 2TT 2T 2TT 2T 2T 0100101111212011121211211222200 20 [[ [[ [[[ [[[[[[[[[[[[ [[ MOMMMOMOOMOOMOOOOOMOMOOOMOMOMOMOOMMMOOMMMOMOMMMMMMMOMMMMMMMOMMMOOOOMOOOORRRRREREEREREEEEREEERREEERERREEREEEERERRE TTTTTTTTTTTTTTTTTTTTTT T OO O LIFFE ]] 5GGGREEG AATAT EASSSASEAASTERTERT NN HHOLOLLLDLDDOLDINGINGSS SS LIMITED
– A L B E R T E I N S T E I N –
ONLY A LIFE LIVED
WORTHWHILE.
FOR OTHERSIS A LIFE
6 ANNUAL REPORT 2012 [ MORE TO LIFE ] 7GREAT EASTERN HOLDINGS LIMITED
– A L BB EE RR TT EE II NN S T E I N ––
LIVEHEALTHIER
Health is the greatest wealth. The first step to a healthier life begins with
the right attitude. We strive to empower our customers to achieve their
wellness aspirations so that they can get more out of life.
8 ANNUAL REPORT 2012 [ MORE TO LIFE ] 9GREAT EASTERN HOLDINGS LIMITED
– A L B E R T E I N S T E I N –
To live better is to live without worry. Beyond creating solutions that
provide our customers with financial security and peace of mind, we are
also committed to developing initiatives that add value to our customers
and enable them to lead more rewarding lives.
LIVEBETTER
10 ANNUAL REPORT 2012 [ MORE TO LIFE ] 11GREAT EASTERN HOLDINGS LIMITED
– A L B E RR TT E I N S T E II NN –
Life is worth living because there are many moments worth living for.
Whether you are celebrating your 60th, a golden anniversary or the birth
of your great-grandson, we have made it our purpose to help you in your
Live Great journey. It’s not just about living longer but living longer...well.
LIVELONGER
12 ANNUAL REPORT 2012 [ MORE TO LIFE ] 13GREAT EASTERN HOLDINGS LIMITED
“More to Life” aptly describes our corporate
philosophy in doing whatever we can to
add value to the lives of our customers
and to be of service to the community.
CHAIRMAN’SSTATEMENT
The Group reported full-year 2012 net profit attributable to shareholders of S$1,189.1 million compared with S$385.7 million in 2011.
FINANCIAL PERFORMANCE
FANG AI LIANChairman
14 ANNUAL REPORT 2012 [ MORE TO LIFE ] 15GREAT EASTERN HOLDINGS LIMITED
DIVIDENDS
REGULATORY DEVELOPMENTS
GIVING BACK TO THE COMMUNITY
ACCOLADES
leading independent intangible asset and
PROSPECTS
and wellness programme of its kind in
ACKNOWLEDGEMENTS
FANG AI LIAN (MRS)Chairman
16 ANNUAL REPORT 2012 [ MORE TO LIFE ] 17GREAT EASTERN HOLDINGS LIMITED
GROUP CEO’SREVIEW
Moving forward, Great Eastern’s clear strategic
focus on customer engagement, product innovation,
professional competency and business collaboration
will allow us to push on for greater success.
DELIVERING STRONG RESULTS
in view of a prolonged low interest rate
As a LIFE company, we want to inspire customers to take ownership of
with loved ones.
CHRISTOPHER WEI
18 ANNUAL REPORT 2012 [ MORE TO LIFE ] 19GREAT EASTERN HOLDINGS LIMITED
ENHANCING CUSTOMER EXPERIENCE
UNIQUE CUSTOMER EXPERIENCE THROUGH THE LIVE GREAT PROGRAMME
STAYING AHEAD THROUGH PRODUCT INNOVATION
Supreme Protect
Supreme Protect is
planning to promote greater awareness
GROWTH THROUGH PARTNERSHIPS
we are intensifying efforts to tap synergies
a major milestone as it inked its first
FOSTERING A CULTURE OF PROFESSIONALISM
efforts to develop a professional and
reward programme to take in a more
Great Eastern in maintaining its market
A POSITIVE OUTLOOK FOR 2013
IN APPRECIATION
CHRISTOPHER WEI
20 ANNUAL REPORT 2012 [ MORE TO LIFE ] 21GREAT EASTERN HOLDINGS LIMITED
BOARD OFDIRECTORS
FANG AI LIANChairman
CHRISTOPHER WEI
LIFE
3 4 5
1 2
109
6 7 8
22 ANNUAL REPORT 2012 [ MORE TO LIFE ] 23GREAT EASTERN HOLDINGS LIMITED
LEE SENG WEE
LEE CHIEN SHIH
TAN YAM PIN
SAMUEL N TSIEN
CHEONG CHOONG KONG
NORMAN IP
KOH BENG SENG
LAW SONG KENG
24 ANNUAL REPORT 2012 [ MORE TO LIFE ] 25GREAT EASTERN HOLDINGS LIMITED
1
4
3 6
5
2
4
1
6
2
3
5
KEYEXECUTIVES
26 ANNUAL REPORT 2012 [ MORE TO LIFE ] 27GREAT EASTERN HOLDINGS LIMITED
LOO BOON TEIKGroup Actuary
DAVID CHIANG BOON KONGManaging Director, Group Human Capital
CHRISTOPHER WEI
TONY CHEONG
ANDREW LEE
KHOO KAH SIANG (DR)
The Great Eastern Life Assurance Company Limited
DATO KOH YAW HUI
YOON MUN THIM
HO MING HENGManaging Director, Group Operations & IT
CHIN WEE CHEAKHead, Group Audit
JENNIFER WONG PAKSHONG
RONNIE TANHead, Group Risk Management
28 ANNUAL REPORT 2012 [ MORE TO LIFE ]
CORPORATE GOVERNANCEREPORT
THE BOARD’S CONDUCT OF AFFAIRS
Board responsibilities and accountability
following:
Board Committees
29
CORPORATE GOVERNANCEREPORT
Meetings and Directors’ attendance
BoardNominating Committee
(“NC”)Audit Committee
(“AC”)
No. of Meetings No. of Meetings No. of Meetings
Scheduled* Ad hoc Scheduled Scheduled
Name of Director Held Attended Attended Held Attended Held Attended
Fang Ai Lian 8 8 2 2 2 4 4
8 8 2
8 8 2 2 2
David Conner 1 1 1
8 8 1 4 4
8 8 2
8 8 2 2 2
8 8 2
2 2 1 1 1
Tan Yam Pin 8 8 1 2 2 4 4
7 7 1
Directors’ attendance at Board and Board Committee meetings in 2012
30 ANNUAL REPORT 2012 [ MORE TO LIFE ]
CORPORATE GOVERNANCEREPORT
RemunerationCommittee (“RC”)
ExecutiveCommittee (“Exco”)
Risk and InvestmentCommittee (“RIC”)
No. of Meetings No. of Meetings No. of Meetings
Scheduled Scheduled Ad hoc Scheduled
Name of Director Held Attended Held Attended Attended Held Attended
Fang Ai Lian 2 2 6 6 2 6 6
3 3 2 6 6
3(5)
6 6 2
David Conner 1 1 2 2 1 2 2
6 6
2 2 6 6
2 2
Tan Yam Pin 6 6 2
4(5) 1(5) 4 3
Directors’ attendance at Board and Board Committee meetings in 2012 (continued)
31
CORPORATE GOVERNANCEREPORT
Appointment of New Directors
Board Development
BOARD COMPOSITION AND GUIDANCE
Board Membership
Board independence
Board Composition
32 ANNUAL REPORT 2012 [ MORE TO LIFE ]
CORPORATE GOVERNANCEREPORT
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
inter alia
PROCESS FOR APPOINTMENT OF NEW DIRECTORS
NOMINATING COMMITTEE
33
CORPORATE GOVERNANCEREPORT
Re-nomination of Directors
Key information on Directors
BOARD PERFORMANCE
34 ANNUAL REPORT 2012 [ MORE TO LIFE ]
CORPORATE GOVERNANCEREPORT
ACCESS TO INFORMATION
Board and Board Committees and between senior management
PROCEDURES FOR DEVELOPING REMUNERATION POLICIES, LEVEL AND MIX OF REMUNERATION AND DISCLOSURE ON REMUNERATION
REMUNERATION COMMITTEE
Committee are as follows:
35
CORPORATE GOVERNANCEREPORT
Remuneration of non-executive Directors
Board
Board Committees
Remuneration policy in respect of Executive Director and key senior management executives
36 ANNUAL REPORT 2012 [ MORE TO LIFE ]
CORPORATE GOVERNANCEREPORT
Disclosure on Directors’ remuneration
Total Remuneration
Salary and Fees
Bonuses(1) Long term incentives(2)
in-kind(3)
Name of Director $’000 $’000 $’000 $’000 $’000
Non-Executive Directors
Fang Ai Lian 700 621 79
180 180
David Conner 68 68
192 192
174 174
126 126
126 126
44 44
Tan Yam Pin 252 252
122 122
Executive Director
4,101 1,100 1,322 1,355 324
37
CORPORATE GOVERNANCEREPORT
Share option scheme
ACCOUNTABILITY
AUDIT COMMITTEE
38 ANNUAL REPORT 2012 [ MORE TO LIFE ]
CORPORATE GOVERNANCEREPORT
following:
INTERNAL CONTROLS
39
CORPORATE GOVERNANCEREPORT
INTERNAL AUDIT
RISK AND INVESTMENT COMMITTEE AND RISK MANAGEMENT
40 ANNUAL REPORT 2012 [ MORE TO LIFE ]
CORPORATE GOVERNANCEREPORT
EXECUTIVE COMMITTEE
COMMUNICATION WITH SHAREHOLDERS
41
CORPORATE GOVERNANCEREPORT
DEALINGS IN SECURITIES
RELATED PARTY TRANSACTIONS
CODE OF CONDUCT
42 ANNUAL REPORT 2012 [ MORE TO LIFE ]
CORPORATE GOVERNANCEREPORT
ADDITIONAL INFORMATION REQUIRED UNDER THE LISTING MANUAL OF THE SINGAPORE EXCHANGE SECURITIES TRADING LIMITED
1. INTERESTED PERSON TRANSACTIONS
Aggregate value of all interested Aggregate value of person transactions during all interested person
(excluding transactions less under shareholders’ than $100,000 and transactions mandate pursuant to conducted under shareholders’ Rule 920 of Listing Manual mandate pursuant to Rule 920 (excluding transactions of Listing Manual) less than $100,000)
Name of interested person $ million $ million
2. OTHER INFORMATION
43
CORPORATEINFORMATION
BOARD OF DIRECTORS
Tan Yam Pin
NOMINATING COMMITTEE
Tan Yam Pin
EXECUTIVE COMMITTEE
Tan Yam Pin
AUDIT COMMITTEE
REMUNERATION COMMITTEE
RISK & INVESTMENT COMMITTEE
GROUP COMPANY SECRETARY
REGISTERED OFFICE
Great Eastern Centre
SHARE REGISTRAR
AUDITOR
44 ANNUAL REPORT 2012 [ MORE TO LIFE ]
FINANCIALHIGHLIGHTS
Financial year ended 31 December 2012 2011 2010 2009 2008
GROUP STATISTICS 6,614.5
1,189.1
59,701.0
4,797.0
15.66
Market Capitalisation 7,412.2
8,604.8
352.7
GROUP FINANCIAL RATIOS 27.3%
2.9%
2.51
2.51
10.13
18.180
0.745
37.0
45
Total assetsS$ millions
FY
08
FY
09
FY
10
FY
11
FY
12
44,1
55.2
48,5
31.2
53,3
73.0
55,6
02.6
59,7
01.0
7%
Profit attributable
to shareholders S$ millions
FY
08
FY
09
FY
10
FY
11
FY
12
272.
4
516.
7
507.
2
385.
7
1,18
9.1
208%
Gross premiumsS$ millions
FY
08
FY
09
FY
10
FY
11
FY
12
7,02
9.7
5,83
3.6
6,15
5.8
6,43
0.7
6,61
4.5
3%
Embedded valueS$ millions
FY
08
FY
09
FY
10
FY
11
FY
12
5,78
8.0
6,23
2.1
7,07
4.9
7,46
5.3
8,60
4.8
15%
Economic value of one year’s
new business S$ millions
FY
08
FY
09
FY
10
FY
11
FY
12
264.
1
234.
6
304.
9
364.
8
352.
7
3%
Shareholders’ fundS$ millions
FY
08
FY
09
FY
10
FY
11
FY
12
3,01
1.2
3,56
6.3
4,02
4.0
3,91
2.3
4,79
7.0
Stock exchange prices S$
FY
08
FY
09
FY
10
FY
11
FY
12
9.06
13.5
4
15.6
2
12.6
0
15.6
6
Market capitalisationS$ millions
FY
08
FY
09
FY
10
FY
11
FY
12
4,28
8.3
6,40
8.7
7,39
3.2
5,96
3.8
7,41
2.2
23% 24% 24%
46 ANNUAL REPORT 2012 [ MORE TO LIFE ]
EMBEDDEDVALUE
been developed as a way to estimate
VALUE OF IN-FORCE BUSINESSADJUSTED SHAREHOLDERS’ FUND
ASSUMPTIONS USED
EMBEDDED VALUE CALCULATION
ECONOMIC VALUE OF ONE YEAR’S NEW BUSINESS
47
Table 1:
Embedded Value (S$ millions) Singapore Malaysia Total
Life Businesses
Value of In-Force Business 2,583 1,828 4,411
Shareholders’ Funds and Non-Life Businesses
Adjusted Shareholders’ Funds
3,800* 394ˆ 4,194
Total Embedded Value 6,383 2,222 8,605* Includes businesses in Brunei, China, Hong Kong, Indonesia, Sri Lanka and Vietnam
ˆ Includes Great Eastern Takaful Sdn Bhd (GETSB)
Table 3:
Values (S$ millions)
Base
Scenario
Investment +0.50%
Discount Rate +1%
Investment -0.50%
Discount Rate -1%
Total Embedded Value 8,605 8,493 8,706
Economic Value
of One Year’s
New Business 353 336 369
Table 2:
Values (S$ millions) Singapore Malaysia*
OtherAsia**
and GETSB Total
Economic Value of One Year’s
New Business 209 131 13 353* Excludes GETSB
** Includes Group’s regional operations in Brunei, China, Indonesia and Vietnam
INDEPENDENT REVIEW
SCENARIO TESTING
ANALYSIS OF CHANGE IN EMBEDDED VALUE (S$ MILLIONS)
2012 7,465 (24) (82) 14 428 366 340* 211 62 (175) 8,605
2011 7,075 71 (126) 101 (44) 327 352* 39 82 (412)** 7,465
Embedded
Value 2011
Returns on
Shareholders’
Funds/Other
Businesses
Opening
Adjustment
Expected
Return on
In-Force
Business
Economic
Assumption
Changes
Value
of New
Business
Written*
Non-
Economic
Assumption
Changes
Life Fund
Investment
Variance
Life Fund
Non-
Investment
Variance
Dividends
Paid
Embedded
Value 2012
7,465 (24) (82)14
428
366
340211 62 (175)
8,605
48 ANNUAL REPORT 2012 [ MORE TO LIFE ] 49GREAT EASTERN HOLDINGS LIMITED
BUSINESSREVIEWSINGAPORE
brand ambition to be a LIFE
INNOVATIVE PRODUCT OFFERINGSSupreme Protect
Singapore to offer Total and Permanent
Mortgage Protector Advantage
Supreme Term, SupremeShield
STRENGTHENING DISTRIBUTION CAPABILITIES BREAKTHROUGHS IN GENERAL
AND GROUP INSURANCE
PI Supreme
Travel Wise
RAMPING UP CUSTOMER ENGAGEMENT
risk assessment and also download Great
Supreme Protect
1
4
2
5
3
50 ANNUAL REPORT 2012 [ MORE TO LIFE ] 51GREAT EASTERN HOLDINGS LIMITED
BUSINESSREVIEWMALAYSIA
LEVERAGING OUR BRAND AND LIVE GREAT
brand ambition to be a LIFE
initiatives as we strove to make life great SEIZING BUSINESS OPPORTUNITIES
Great Retirement Plan
Smart Medic Enhancer
BUILDING OUR DISTRIBUTION CAPABILITIES
MaxRetire
GROWING OUR TAKAFUL OPERATIONS
Entrepreneur Takaful Plan
Mortgage Reducing Term Takaful
AWARDS AND RECOGNITION
1
2 5
3
4
52 ANNUAL REPORT 2012 [ MORE TO LIFE ] 53GREAT EASTERN HOLDINGS LIMITED
BUSINESSREVIEWEMERGINGMARKETS
INDONESIA
MaxPrestige Heritage
MaxHealth
MaxPrestige Care
a new professional advisory model as well
Greatlink Prime Investpro USD and Greatlink Flexipro USD
Healthcare 360
VIETNAM
Excellent Education Plan
Healthcare 360
CHINA
BRUNEI
1
4
2
3
5
54 ANNUAL REPORT 2012 [ MORE TO LIFE ] 55GREAT EASTERN HOLDINGS LIMITED
– A L B E R T E I N S T E I N –
To live fuller is to lead a purposeful life and make a difference in the lives
of others. Even as we deliver our best to our customers, we also seek
to give our best to the communities we work in. We believe life is truly
greater when we make someone else’s life better.
LIVEFULLER
56 ANNUAL REPORT 2012 [ MORE TO LIFE ] 57GREAT EASTERN HOLDINGS LIMITED
3
CORPORATESOCIALRESPONSIBILITY
11
4
2
5
LIVING GREAT THROUGH SPORTS
HELPING OUR YOUNG AND ELDERLY FRIENDS LIVE GREAT
EMPOWERING THROUGH EDUCATION
Excellent Education Plan
OTHER COMMUNITY INITIATIVES
Healthcare 360
JOINT CSR WITH OCBC BANK
58 ANNUAL REPORT 2012 [ MORE TO LIFE ] 59GREAT EASTERN HOLDINGS LIMITED
– A L B E R T E I N S T E I N –
Happiness is key to living great. With this in mind, Great Eastern has
nurtured an invigorating, engaging and positive environment to bring
forth the best in our people and help them realise their fullest potential.
After all, our employees are our most valuable assets.
LIVEHAPPIER
60 ANNUAL REPORT 2012 [ MORE TO LIFE ] 61GREAT EASTERN HOLDINGS LIMITED
HUMANCAPITAL
an engaging environment for employees
INVESTING IN TALENT MANAGEMENT
DRIVING PERFORMANCE THROUGH TOTAL REWARDS
BUILDING AN ENGAGED WORKFORCE
providing a great working environment
OUR DEDICATED DISTRIBUTION FORCE
1
4 56
2
3
62 ANNUAL REPORT 2012 [ MORE TO LIFE ] 63GREAT EASTERN HOLDINGS LIMITED
LIVE GREATERIn a world of seven billion people, there will never be another you. To love your family the way
you do. And to take care of them as they care for you. So start living Healthier, Better and
Longer for those who matter most to you. Live Greater because there’s More to Life.
64 ANNUAL REPORT 2012 [ MORE TO LIFE ] 65GREAT EASTERN HOLDINGS LIMITED
YEAR IN REVIEW(HIGHLIGHTS)
JANUARY
FEBRUARY
Supreme ProtectMaxPrestige Care and
MaxHealth
MARCH
i-Great Iqra
Synergy Station was opened in Kota
APRIL
MAY
and wellness programme by an
PI Supreme
JUNE
JULY
Entrepreneur Takaful Plan
Excellent Education Plan
AUGUST
SEPTEMBER
MaxPrestige Heritage
sponsored by GELS drew good
OCTOBER
NOVEMBER
Mortgage Protector Advantage was
Great Retirement Plan was
I-Great Teras
DECEMBER
Healthcare 360
1
3
6
7
5
8
4
2
66 ANNUAL REPORT 2012 [ MORE TO LIFE ]
FINANCIAL STATEMENTS
Statement
Statement
DIRECTORS’REPORT
The Directors present their report to the members together with the audited consolidated financial statements of Great Eastern
Holdings Limited (“GEH” or the “Company”) and its subsidiaries (collectively the “Group”) for the financial year ended 31 December
2012.
1. DIRECTORS
The Directors of the Company in office at the date of this report are:
Mrs Fang Ai Lian, ChairmanMr Christopher Wei,
Dr Cheong Choong Kong
Mr Norman Ip
Mr Koh Beng Seng
Mr Law Song Keng (appointed on 1 January 2013)
Mr Lee Seng Wee
Mr Lee Chien Shih
Mr Tan Yam Pin
Mr Samuel N Tsien
Mr Norman Ip and Mr Lee Chien Shih will retire by rotation in accordance with Article 91 of the Company’s Articles of
Association at the forthcoming annual general meeting (“AGM”) of the Company and, being eligible, will offer themselves for
re-election at the AGM.
Mr Law Song Keng, who was appointed in accordance with Article 97 of the Company’s Articles of Association, will retire at
the forthcoming AGM of the Company in accordance with the provisions of that Article and, being eligible, will offer himself
for re-election at the AGM.
Dr Cheong Choong Kong and Mr Tan Yam Pin will retire pursuant to Section 153 of the Companies Act, Chapter 50 (the
“Companies Act”) at the forthcoming AGM of the Company. Resolutions will be proposed at the forthcoming AGM of the
Company for their re-appointment under Section 153(6) of the Companies Act to hold office until the next AGM of the
Company.
Mr Lee Seng Wee will retire pursuant to Section 153 of the Companies Act and will not offer himself for re-appointment.
2. ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES OR DEBENTURES
Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object
was to enable the Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of,
the Company or any other body corporate, save as disclosed in this report.
67GREAT EASTERN HOLDINGS LIMITED
3. DIRECTORS’ INTERESTS IN SHARES OR DEBENTURES
According to the register of Directors’ shareholdings, none of the Directors who held office at the end of the financial year
had any interest in shares in, or debentures of, the Company as at the end of the financial year and as at 21 January 2013.
Mr Law Song Keng who was appointed on 1 January 2013 did not hold any interest in shares in, or debentures of, the
Company as at 21 January 2013. Directors’ interests in shares in, or debentures of, the Company’s holding company,
Oversea-Chinese Banking Corporation Limited (“OCBC Bank”) and its related corporations are as follows:
Holdings registered in the
name of Directors or in which
Directors have a direct interest
Holdings in which Directors
are deemed to
have an interest
As at 1.1.2012
or date of
appointment
As at
31.12.2012
As at 1.1.2012
or date of
appointment
As at
31.12.2012
(i) Ordinary shares in the capital of OCBC Bank
Mrs Fang Ai Lian 62,671 68,671 - -
Mr Christopher Wei - - - 62,021(2)
Dr Cheong Choong Kong 178,373 378,373 10,831(1) 10,831(1)
Mr Norman Ip 3,383 3,383 - -
Mr Lee Seng Wee 7,525,454 7,531,454 4,401,409(1) 4,401,409(1)
Mr Lee Chien Shih 1,999,134 1,999,134 - -
Mr Samuel N Tsien 121,555 121,555 214,802(3) 222,139(4)
(ii) 4.2% non-cumulative non-convertible
Class G preference shares in OCBC Bank
Dr Cheong Choong Kong 15,000 15,000 - -
Mr Norman Ip 2,000 2,000 - -
Mr Lee Seng Wee 800,000 800,000 600,000(1) 600,000(1)
Mr Lee Chien Shih 176,000 176,000 - -
(iii) 5.1% non-cumulative non-convertible
Class B preference shares in OCBC Bank
Mrs Fang Ai Lian 1,700 1,700 - -
Mr Tan Yam Pin - - 2,000(1) 2,000(1)
(iv) OCBC Capital Corporation (2008)
5.1% non-cumulative non-convertible
guaranteed preference shares
Dr Cheong Choong Kong 10,000 10,000 - -
(v) OCBC Bank 5.6% Subordinated Notes
Due 2019
Mr Tan Yam Pin - - 500,000(1) 500,000(1)
Notes(1) Held by spouse.(2) Comprises deemed interest in 62,021 ordinary shares subject to award(s) granted under the OCBC Deferred Share Plan.(3) Comprises deemed interest in 206,780 ordinary shares subject to award(s) granted under the OCBC Deferred Share Plan and subscription rights over
8,022 ordinary shares granted under the OCBC Employee Share Purchase Plan.(4) Comprises deemed interest in 214,084 ordinary shares subject to award(s) granted under the OCBC Deferred Share Plan and subscription rights over
8,055 ordinary shares granted under the OCBC Employee Share Purchase Plan.
DIRECTORS’REPORT
68 ANNUAL REPORT 2012 [ MORE TO LIFE ]
3. DIRECTORS’ INTERESTS IN SHARES OR DEBENTURES (continued)
(vi) Share options
According to the register of Directors’ shareholdings, as at the beginning and as at the end of the financial year, the
following Directors have interests in share options to subscribe for ordinary shares in the capital of OCBC Bank under
the OCBC Share Option Scheme 2001, as follows:
Options held by Directors
Options in which Directors are
deemed to have an interest
As at
1.1.2012
or date of
appointment
As at
31.12.2012
As at
1.1.2012
or date of
appointment
As at
31.12.2012
Mr Christopher Wei - 562,441 - -
Dr Cheong Choong Kong 1,637,787 1,778,711 - -
Mr Samuel N Tsien 1,125,538 1,125,538 - -
Save as disclosed above, the Directors did not have any interest in shares in, or debentures of, the Company or any related
corporation either at the beginning of the financial year, date of appointment or at the end of the financial year.
4. DIRECTORS’ CONTRACTUAL BENEFITS
Since the end of the previous financial year, no Director has received, or become entitled to receive, benefits by reason of
a contract made by the Company or a related corporation with the Director, or with a firm of which he is a member, or with
a company in which he has a substantial financial interest, save as disclosed in this report, and except for employment
remuneration/benefits received by the Company’s Group Chief Executive Officer as disclosed in the financial statements,
and further except for employment remuneration/benefits received by another Director in his capacity as the Chief Executive
Officer of the Company’s holding company, OCBC Bank.
One of the Company’s non-executive Directors, Dr Cheong Choong Kong (“Dr Cheong”), who is also a non-executive
Director and Chairman of OCBC Bank, had entered into an agreement with OCBC Management Services Private Limited,
a wholly-owned subsidiary of OCBC Bank, under which Dr Cheong was appointed as consultant to oversee and supervise
the strategic planning of OCBC Bank and its subsidiaries with respect to customer service, talent identification, and the
development and succession of senior management within the OCBC Group. This Agreement expired and ceased on 30
June 2012. Under the agreement, in respect of the financial year ended 31 December 2012, when the agreement was
applicable for the period from 1 January to 30 June 2012, Dr Cheong has received payments and benefits amounting to
$547,528 and will receive a variable bonus of $50,000 or any additional bonus as may be determined by the Remuneration
Committee and the Board of Directors of OCBC Bank. In respect of the financial year ended 31 December 2011 (full year), Dr
Cheong received aggregate payments and benefits of $1,117,155 and a variable bonus of $1,000,000, comprising a bonus
of $100,000 and an additional bonus of $900,000.
In his capacity as a non-executive Director of GEH and one of GEH’s subsidiaries, Dr Cheong receives Directors’ fees and
the amount of his Directors’ fees for the financial year ended 31 December 2012 has been included in the total amount of
Directors’ remuneration disclosed in the Corporate Governance Section of the Annual Report. In his capacity as a director
of OCBC Bank, Dr Cheong is also eligible for any Directors’ fees or share options from OCBC Bank that are recommended
by the Board of Directors of OCBC Bank.
DIRECTORS’REPORT
69GREAT EASTERN HOLDINGS LIMITED
5. SHARE OPTIONS
The Company does not have any share option scheme in place.
Certain Directors of the Company, in particular those who are also Directors of OCBC Bank, are participants of the OCBC
Share Option Scheme 2001 and certain other plans implemented by OCBC Bank, such as the OCBC Deferred Share Plan
and the OCBC Employee Share Purchase Plan. Directors’ interests in shares and share options in OCBC Bank are set out
in paragraph 3 above.
6. AUDIT COMMITTEE
The Audit Committee (“AC”) comprises four non-executive independent Directors. The AC members at the date of this
report are Mr Tan Yam Pin (AC Chairman), Mrs Fang Ai Lian, Mr Norman Ip and Mr Law Song Keng. The AC convened four
meetings during the financial year under review.
The AC performs the functions specified under Section 201B(5) of the Companies Act, Chapter 50, including review with
the auditor of their audit plan, their evaluation of the system of internal accounting controls and their audit report, review the
assistance given by the Company’s officers to the auditor, review the scope and results of the internal audit procedures,
review the financial statements of the Company and of the Group and the auditor’s report thereon, and thereafter submits
them to the Company’s Board of Directors. Details of the functions performed by the AC, including functions specified in
the Listing Manual, the Banking (Corporate Governance) Regulations 2005, Banking (Corporate Governance) (Amendment)
Regulations 2010, MAS CG Guidelines for Corporate Governance and the Code of Corporate Governance, are set out in the
Report on Corporate Governance included in the Company’s Annual Report for the financial year ended 31 December 2012.
The AC has nominated Ernst & Young LLP for re-appointment as auditor at the Annual General Meeting of the Company.
7. AUDITOR
The auditor, Ernst & Young LLP, has expressed their willingness to accept re-appointment.
On behalf of the Board of Directors
Fang Ai Lian Christopher Wei
Chairman Director
Singapore
7 February 2013
DIRECTORS’REPORT
70 ANNUAL REPORT 2012 [ MORE TO LIFE ]
We, Fang Ai Lian and Christopher Wei, being two of the Directors of Great Eastern Holdings Limited (the “Company”), do hereby
state that, in the opinion of the Directors:
(i) the accompanying financial statements of the Company and its subsidiaries (collectively, the “Group”), which comprise the
balance sheets of the Group and of the Company as at 31 December 2012, the profit and loss statements, the statements
of changes in equity and the statements of comprehensive income of the Group and of the Company and the statement of
cash flows, the life assurance revenue statement and general insurance revenue statement of the Group for the year then
ended, and a summary of significant accounting policies and other explanatory information, are drawn up so as to give a
true and fair view of the state of affairs of the Group and of the Company as at 31 December 2012 and the results, changes
in equity of the Group and of the Company and the cash flows and results of the insurance operations of the Group for the
financial year ended on that date; and
(ii) at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and
when they fall due.
On behalf of the Board of Directors
Fang Ai Lian Christopher Wei
Chairman Director
Singapore
7 February 2013
STATEMENT BYDIRECTORSPursuant to Section 201(15) of the Companies Act, Chapter 50
71GREAT EASTERN HOLDINGS LIMITED
INDEPENDENTAUDITOR’S REPORTto the members of Great Eastern Holdings Limited
REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of Great Eastern Holdings Limited (the “Company”) and its subsidiaries
(collectively, the “Group”) set out on pages 73 to 193, which comprise the balance sheets of the Group and the Company as
at 31 December 2012, the profit and loss statements, statements of comprehensive income and the statements of changes in
equity of the Group and the Company, the statement of cash flows, the life assurance revenue statement and general insurance
revenue statement of the Group for the year then ended, and a summary of significant accounting policies and other explanatory
information.
MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the
provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards, and for devising
and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded
against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary
to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets.
AUDITOR’S RESPONSIBILITY
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance
with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OPINION
In our opinion, the consolidated financial statements of the Group and the balance sheet, profit and loss statement, statement
of comprehensive income and statement of changes in equity of the Company are properly drawn up in accordance with the
provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the
Group and of the Company as at 31 December 2012 and the results and changes in equity of the Group and of the Company and
the cash flows of the Group and results of the insurance operations of the Group for the year ended on that date.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries
incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.
Ernst & Young LLP
Public Accountants and Certified Public Accountants
Singapore
7 February 2013
72 ANNUAL REPORT 2012 [ MORE TO LIFE ]
PROFIT & LOSSSTATEMENTS
Group Company
in Singapore Dollars (millions) Note 2012 2011 2012 2011
Gross Premiums 6,614.5 6,430.7 - -
Life assurance profit from:
Participating Fund 144.0 121.5 - -
Non-participating Fund 422.5 134.4 - -
Investment-linked Fund 125.2 126.6 - -
Profit from life assurance 691.7 382.5 - -
Profit from general insurance 34.4 29.3 - -
Profit from insurance operations 726.1 411.8 - -
Dividend from subsidiaries - - 515.7 308.3
Investment income, net 4 111.4 96.4 - -
Gain/(loss) on sale of investments and changes in fair value 5 562.9 (9.9) - -
Increase in provision for impairment of assets 6 (0.2) (1.9) - (1.6)
(Loss)/gain on exchange differences (0.5) 0.4 - -
Profit from investments in Shareholders’ Fund 673.6 85.0 515.7 306.7
Fees and other income 64.8 69.0 0.8 1.7
Profit before expenses 1,464.5 565.8 516.5 308.4
less:
Management and other expenses 71.6 72.1 10.7 8.2
Interest expense 18.3 18.3 - -
Depreciation 2.2 1.9 0.1 0.1
Expenses 92.1 92.3 10.8 8.3
Profit after expenses 1,372.4 473.5 505.7 300.1
Share of loss after income tax of joint ventures (3.2) (8.4) - -
Profit before income tax 8 1,369.2 465.1 505.7 300.1
Income tax (173.9) (73.3) - -
Profit after income tax 1,195.3 391.8 505.7 300.1
Attributable to:
Shareholders 1,189.1 385.7 505.7 300.1
Non-controlling interests 6.2 6.1 - -
1,195.3 391.8 505.7 300.1
Basic and diluted earnings per share attributable to
shareholders of the Company (in Singapore Dollars) 10 $2.51 $0.81
The accompanying significant accounting policies and explanatory notes form an integral part of the financial statements.
73GREAT EASTERN HOLDINGS LIMITED
STATEMENT OFCOMPREHENSIVE INCOME
Group Company
in Singapore Dollars (millions) Note 2012 2011 2012 2011
Profit after income tax for the year 1,195.3 391.8 505.7 300.1
Other comprehensive income:
Exchange differences arising on translation of
overseas entities (15.5) (14.7) - -
Share of other comprehensive income of
associates and joint ventures (3.3) 4.1 - -
Available-for-sale financial assets:
Changes in fair value 364.2 (69.0) - -
Reclassification of realised gain on
disposal to Profit and Loss Statement 5 (493.7) (22.8) - -
Tax on changes in fair value 9 22.3 15.9 - -
Other comprehensive income for the year, after tax (126.0) (86.5) - -
Total comprehensive income for the year 1,069.3 305.3 505.7 300.1
Total comprehensive income attributable to:
Shareholders 1,059.8 300.1 505.7 300.1
Non-controlling interests 9.5 5.2 - -
1,069.3 305.3 505.7 300.1
The accompanying significant accounting policies and explanatory notes form an integral part of the financial statements.
74 ANNUAL REPORT 2012 [ MORE TO LIFE ]
BALANCE SHEETS- GROUP
The accompanying significant accounting policies and explanatory notes form an integral part of the financial statements.
Group
Total
Shareholders’ and
General Insurance Funds Life Assurance Fund
in Singapore Dollars (millions) Note 2012 2011 2012 2011 2012 2011
Share capital 11 152.7 152.7 152.7 152.7 - -
Reserves
Currency translation reserve 12 (63.7) (42.6) (63.7) (42.6) - -
Fair value reserve 12 41.8 150.0 41.8 150.0 - -
Accumulated profit 4,666.2 3,652.2 4,666.2 3,652.2 - -
SHAREHOLDERS’ FUND 4,797.0 3,912.3 4,797.0 3,912.3 - -
NON-CONTROLLING
INTERESTS 42.5 30.2 42.5 30.2 - -
TOTAL EQUITY 4,839.5 3,942.5 4,839.5 3,942.5 - -
LIABILITIES
Insurance payables 13 2,791.2 2,517.5 24.3 24.1 2,766.9 2,493.4
Other creditors and interfund
balances 14 2,461.5 2,364.9 115.9 306.6 2,345.6 2,058.3
Unexpired risk reserve 16 120.3 111.8 120.3 111.8 - -
Derivative financial liabilities 23 42.0 62.1 0.2 1.2 41.8 60.9
Income tax 487.8 417.9 145.1 97.4 342.7 320.5
Provision for agents’
retirement benefits 7 245.2 231.3 - - 245.2 231.3
Amount due to joint venture 21 - 0.1 - 0.1 - -
Deferred tax 9 1,069.9 945.9 62.5 87.8 1,007.4 858.1
Debt issued 15 399.2 399.1 399.2 399.1 - -
General insurance fund 17 186.5 188.7 186.5 188.7 - -
Life assurance fund 18 47,057.9 44,420.8 - - 47,057.9 44,420.8
TOTAL EQUITY AND
LIABILITIES 59,701.0 55,602.6 5,893.5 5,159.3 53,807.5 50,443.3
ASSETS
Cash and cash equivalents 4,212.6 7,248.9 588.5 713.1 3,624.1 6,535.8
Other debtors and interfund
balances 19 1,902.6 1,517.7 1,402.9 1,081.3 499.7 436.4
Insurance receivables 20 2,582.4 2,558.1 130.8 130.5 2,451.6 2,427.6
Loans 22 1,084.0 1,202.5 36.1 44.4 1,047.9 1,158.1
Derivative financial assets 23 490.7 438.0 2.1 2.6 488.6 435.4
Investments 24 46,825.7 40,152.9 3,608.7 3,057.3 43,217.0 37,095.6
Assets held for sale 25 3.0 4.4 3.0 4.4 - -
Associates and joint ventures 26 322.9 320.2 74.6 81.1 248.3 239.1
Goodwill 28 34.1 26.1 34.1 26.1 - -
Investment properties 29 1,531.6 1,411.8 - 5.1 1,531.6 1,406.7
Property, plant and
equipment 30 711.4 722.0 12.7 13.4 698.7 708.6
TOTAL ASSETS 59,701.0 55,602.6 5,893.5 5,159.3 53,807.5 50,443.3
75GREAT EASTERN HOLDINGS LIMITED
The accompanying significant accounting policies and explanatory notes form an integral part of the financial statements.
BALANCE SHEET- COMPANY
Company
in Singapore Dollars (millions) Note 2012 2011
Share capital 11 152.7 152.7
Reserves
Merger reserve 12 419.2 419.2
Accumulated profit 1,157.1 826.5
TOTAL EQUITY 1,729.0 1,398.4
LIABILITIES
Other creditors 14 6.4 6.1
Income tax 0.1 -
TOTAL EQUITY AND LIABILITIES 1,735.5 1,404.5
ASSETS
Cash and cash equivalents 57.8 9.0
Income tax - 0.8
Amounts due from subsidiaries 21 1,000.3 717.3
Subsidiaries 27 677.3 677.3
Property, plant and equipment 0.1 0.1
TOTAL ASSETS 1,735.5 1,404.5
76 ANNUAL REPORT 2012 [ MORE TO LIFE ]
The accompanying significant accounting policies and explanatory notes form an integral part of the financial statements.
STATEMENTS OF CHANGES IN EQUITY- GROUP
Attributable to shareholders of the Company
in Singapore Dollars (millions) Note
Share
Capital
Currency
Translation
Reserve
Fair Value
Reserve
Accumulated
Profit (1) Total
Non-
Controlling
Interests
Total
Equity
Balance at 1 January 2012 152.7 (42.6) 150.0 3,652.2 3,912.3 30.2 3,942.5
Profit for the year - - - 1,189.1 1,189.1 6.2 1,195.3
Other comprehensive income
Exchange differences arising on
translation of overseas entities - (17.6) - - (17.6) 2.1 (15.5)
Share of other comprehensive
income of associates and joint
ventures - (3.5) 0.2 - (3.3) - (3.3)
Available-for-sale financial
assets:
Changes in fair value - - 363.0 - 363.0 1.2 364.2
Reclassification of realised
gain on disposal to Profit and
Loss Statement - - (493.7) - (493.7) - (493.7)
Tax on changes in fair value - - 22.3 - 22.3 - 22.3
Other comprehensive income for
the year, after tax - (21.1) (108.2) - (129.3) 3.3 (126.0)
Total comprehensive income for
the year - (21.1) (108.2) 1,189.1 1,059.8 9.5 1,069.3
Contributions by and
distributions to shareholders
Dividends paid during the year:
Final tax exempt (one-tier)
dividend for the previous year 37 - - - (127.8) (127.8) - (127.8)
Interim tax exempt (one-tier)
dividend 37 - - - (47.3) (47.3) - (47.3)
Dividends paid to non-controlling
interests - - - - - (2.5) (2.5)
Total contributions by and
distributions to shareholders - - - (175.1) (175.1) (2.5) (177.6)
Changes in ownership interests
in subsidiaries that do not
result in a loss of control
Acquisition of subsidiary - - - - - 5.3 5.3
Total changes in ownership
interests in subsidiaries - - - - - 5.3 5.3
Total transactions with
shareholders in their capacity
as shareholders - - - (175.1) (175.1) 2.8 (172.3)
Balance at 31 December 2012 152.7 (63.7) 41.8 4,666.2 4,797.0 42.5 4,839.5
(1)
and Malaysia. Refer to Notes 12 and 35 for more details.
77GREAT EASTERN HOLDINGS LIMITED
The accompanying significant accounting policies and explanatory notes form an integral part of the financial statements.
Attributable to shareholders of the Company
in Singapore Dollars (millions) Note
Share
Capital
Currency
Translation
Reserve
Fair Value
Reserve
Accumulated
Profit (1) Total
Non-
Controlling
Interests
Total
Equity
Balance at 1 January 2011 247.4 (32.3) 225.3 3,583.6 4,024.0 35.0 4,059.0
Profit for the year - - - 385.7 385.7 6.1 391.8
Other comprehensive income
Exchange differences arising on
translation of overseas entities - (14.5) - - (14.5) (0.2) (14.7)
Share of other comprehensive
income of associates and joint
ventures - 4.2 (0.1) - 4.1 - 4.1
Available-for-sale financial assets:
Changes in fair value - - (68.2) - (68.2) (0.8) (69.0)
Reclassification of realised gain
on disposal to Profit and Loss
Statement - - (22.8) - (22.8) - (22.8)
Tax on changes in fair value - - 15.8 - 15.8 0.1 15.9
Other comprehensive income for
the year, after tax - (10.3) (75.3) - (85.6) (0.9) (86.5)
Total comprehensive income for
the year - (10.3) (75.3) 385.7 300.1 5.2 305.3
Contributions by and distributions
to shareholders
Capitalisation from accumulated
profit 11 269.8 - - (269.8) - - -
Cash distribution 11 (364.5) - - - (364.5) - (364.5)
Dividends paid during the year:
Interim tax exempt (one-tier)
dividend 37 - - - (47.3) (47.3) - (47.3)
Dividends paid to non-controlling
interests - - - - - (10.0) (10.0)
Total contributions by and
distributions to shareholders (94.7) - - (317.1) (411.8) (10.0) (421.8)
Total transactions with
shareholders in their capacity as
shareholders (94.7) - - (317.1) (411.8) (10.0) (421.8)
Balance at 31 December 2011 152.7 (42.6) 150.0 3,652.2 3,912.3 30.2 3,942.5
(1)
and Malaysia. Refer to Notes 12 and 35 for more details.
STATEMENTS OF CHANGES IN EQUITY- GROUP
78 ANNUAL REPORT 2012 [ MORE TO LIFE ]
The accompanying significant accounting policies and explanatory notes form an integral part of the financial statements.
STATEMENTS OF CHANGES IN EQUITY- COMPANY
in Singapore Dollars (millions) Note
Share
Capital
Merger
Reserve
Accumulated
Profit
Total
Equity
Balance at 1 January 2012 152.7 419.2 826.5 1,398.4
Profit for the year - - 505.7 505.7
Total comprehensive income for the year - - 505.7 505.7
Contributions by and distributions to shareholders
Dividends paid during the year:
Final tax exempt (one-tier) dividend for the
previous year 37 - - (127.8) (127.8)
Interim tax exempt (one-tier) dividend 37 - - (47.3) (47.3)
Total contributions by and distributions to
shareholders - - (175.1) (175.1)
Total transactions with shareholders in their
capacity as shareholders - - (175.1) (175.1)
Balance at 31 December 2012 152.7 419.2 1,157.1 1,729.0
Balance at 1 January 2011 247.4 419.2 843.5 1,510.1
Profit for the year - - 300.1 300.1
Total comprehensive income for the year - - 300.1 300.1
Contributions by and distributions to shareholders
Capitalisation from accumulated profit 11 269.8 - (269.8) -
Cash distribution 11 (364.5) - - (364.5)
Dividends paid during the year:
Interim tax exempt (one-tier) dividend 37 - - (47.3) (47.3)
Total contributions by and distributions to shareholders (94.7) - (317.1) (411.8)
Total transactions with shareholders in their
capacity as shareholders (94.7) - (317.1) (411.8)
Balance at 31 December 2011 152.7 419.2 826.5 1,398.4
79GREAT EASTERN HOLDINGS LIMITED
The accompanying significant accounting policies and explanatory notes form an integral part of the financial statements.
CONSOLIDATED STATEMENT OFCASH FLOWS
in Singapore Dollars (millions) Note 2012 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before income tax 1,369.2 465.1
Life assurance profit before income tax 1,492.3 615.6
General insurance profit before income tax 42.3 39.9
Adjustments for non-cash items:
Surplus transferred from life assurance fund but not yet withdrawn (691.7) (382.5)
Profit transferred from general insurance fund but not yet withdrawn (34.4) (29.3)
Share of (profit)/loss of associates and joint ventures (36.6) 11.6
(Gain)/loss on sale of investments and changes in fair value (3,087.8) 183.1
Increase in provision for impairment of assets 6 9.8 17.6
Increase in provision for agents’ retirement benefits 7 34.4 31.2
Gain on disposal of property, plant and equipment, assets held for sale
and investment properties 8 (1.1) (0.6)
Depreciation 30 49.9 47.7
Unrealised loss/(gain) on exchange differences 84.5 (186.2)
Change in life assurance contract liabilities 18 2,573.5 1,613.5
Change in general insurance contract liabilities 17 1.9 (8.8)
Change in unexpired risk reserve 16 13.4 8.2
Amortisation of capitalised transaction fees 0.1 0.1
Dividend income 4 (451.8) (442.8)
Interest income 4 (1,486.5) (1,430.6)
Interest expense 18.3 18.3
Interest expense on policy benefits 8 100.5 90.4
Share-based payments 8 2.4 3.5
2.6 665.0
Changes in working capital:
Insurance receivables (31.4) (8.3)
Other debtors and interfund balances (304.9) 246.3
Insurance payables 273.7 144.9
Other creditors and interfund balances 93.1 451.6
Cash generated from operations 33.1 1,499.5
Income tax paid (295.1) (199.1)
Interest paid on policy benefits (100.5) (90.4)
Agents’ retirement benefits paid 7 (14.6) (11.9)
Net cash flows (used in)/ from operating activities (377.1) 1,198.1
80 ANNUAL REPORT 2012 [ MORE TO LIFE ]
The accompanying significant accounting policies and explanatory notes form an integral part of the financial statements.
CONSOLIDATED STATEMENT OFCASH FLOWS
in Singapore Dollars (millions) Note 2012 2011
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments 20,516.6 17,852.7
Purchase of investments (24,330.5) (16,090.9)
Proceeds from reduction of interests in associates 26 24.0 19.1
Repayment of loans to joint ventures 21 (0.1) (0.2)
Proceeds from sale of property, plant and equipment, assets held for sale
and investment properties 8.0 3.4
Purchase of property, plant and equipment and investment properties 29, 30 (45.6) (46.8)
Net cash (outflow)/inflow from acquisition of a subsidiary/business 28 (2.4) 10.0
Interest income received 1,374.2 1,379.3
Interest expense paid (18.3) (9.1)
Dividends received 450.3 447.3
Net cash flows (used in)/from investing activities (2,023.8) 3,564.8
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid 37 (175.1) (47.3)
Dividends paid to non-controlling interests (2.5) (10.0)
Proceeds from debt issued - 399.0
Cash distribution 11 - (364.5)
Net cash flows used in financing activities (177.6) (22.8)
Net effect of currency translation reserve adjustment (457.8) (321.6)
Net (decrease)/increase in cash and cash equivalents (3,036.3) 4,418.5
Cash and cash equivalents at the beginning of the year 7,248.9 2,830.4
Cash and cash equivalents at the end of the year 4,212.6 7,248.9
Cash and cash equivalents comprise:
Cash and bank balances 914.0 726.9
Cash on deposit 1,942.3 3,795.6
Short term instruments 1,356.3 2,726.4
4,212.6 7,248.9
Included in the cash and cash equivalents are bank deposits amounting to $2.5 million (31 December 2011: $1.3 million) which
are lodged with the regulator as statutory deposits, which are not available for use by the Group.
81GREAT EASTERN HOLDINGS LIMITED
The accompanying significant accounting policies and explanatory notes form an integral part of the financial statements.
Group
in Singapore Dollars (millions) Note 2012 2011
Income
Gross premiums 6,368.2 6,211.1
less: Premiums ceded to reinsurers 113.7 104.8
Net premiums 6,254.5 6,106.3
Commissions received from reinsurers 12.4 30.1
Investment income, net 4 1,718.2 1,675.9
Rental income, net 57.4 56.1
Gain/(loss) on sale of investments and changes in fair value 5 2,521.5 (174.4)
(Loss)/gain on exchange differences (54.3) 103.4
10,509.7 7,797.4
Expenses
Gross claims, surrenders and annuities 5,437.4 4,580.3
Claims, surrenders and annuities recovered from reinsurers (61.0) (49.6)
Commissions and agency expenses 706.7 664.4
Increase in provision for impairment of assets 6 9.6 15.7
Management expenses 309.9 278.0
Agents’ retirement benefits 7 34.4 31.2
Depreciation 30 46.7 45.1
Change in life assurance fund contract liabilities 18 2,573.5 1,613.5
9,057.2 7,178.6
Life assurance profit before share of profit/(loss) of associates and joint ventures 1,452.5 618.8
Share of profit/(loss) of associates 40.1 (3.2)
Share of loss of joint ventures (0.3) -
Life assurance profit before income tax 1,492.3 615.6
Income tax 9 (308.2) (149.2)
Life assurance profit after income tax 18 1,184.1 466.4
Retained in life assurance fund 492.4 83.9
Transferred to Profit and Loss Statement 18 691.7 382.5
1,184.1 466.4
LIFE ASSURANCEREVENUE STATEMENT
82 ANNUAL REPORT 2012 [ MORE TO LIFE ]
The accompanying significant accounting policies and explanatory notes form an integral part of the financial statements.
GENERAL INSURANCEREVENUE STATEMENT
Group
in Singapore Dollars (millions) Note 2012 2011
Income
Gross premiums 246.3 219.6
Premiums ceded to reinsurers 89.3 85.8
Increase in unexpired risk reserve during the year 16 7.7 5.7
Net premiums 149.3 128.1
Commissions received from reinsurers 25.7 25.6
Investment income, net 4 12.9 10.2
Rental income, net 0.1 0.6
Gain on sale of investments and changes in fair value 5 4.5 1.8
Gain on exchange differences 0.1 0.4
Total income 192.6 166.7
Expenses
Gross claims and increase in loss reserve 93.1 90.3
Claims ceded to reinsurers and changes in loss reserve ceded to reinsurers (17.5) (32.3)
Commissions and agency expenses 41.6 36.5
Management expenses 32.1 31.6
Depreciation 1.0 0.7
Total expenses 150.3 126.8
General insurance profit before income tax 42.3 39.9
Income tax (7.9) (10.6)
Profit from general insurance transferred to Profit and Loss Statement 34.4 29.3
83GREAT EASTERN HOLDINGS LIMITED
1. GENERAL
Great Eastern Holdings Limited (the “Company” or “GEH”) is a limited liability company which is incorporated and domiciled
in the Republic of Singapore. The notes refer to the Company and the Group unless otherwise stated. The registered office
and principal place of business of the Company is located at 1 Pickering Street, #16-01, Great Eastern Centre, Singapore
048659.
The principal activity of the Company is that of an investment holding company. The principal activities of the significant
subsidiaries within the Group are stated in Note 3. There have been no significant changes in the nature of these activities
during the financial year.
The Company’s immediate and ultimate holding company is Oversea-Chinese Banking Corporation Limited (“OCBC Bank”),
which prepares financial statements for public use.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of Preparation
The consolidated financial statements have been prepared in accordance with the Singapore Financial Reporting
Standards (“FRS”) and Interpretations of FRS (“INT FRS”) as required by the Companies Act, Chapter 50. The basis for
preparation of the financial statements is fund accounting and the insurance fund profit that is transferred to the Group
Profit and Loss Statements is determined in accordance with the Insurance Regulations of the respective jurisdictions
in which the insurance subsidiaries operate. The financial statements have been prepared under the historical cost
convention, except as disclosed in the accounting policies below.
The accounting policies have been consistently applied by the Company and the Group and are consistent with those
used in the previous financial year, except as disclosed below.
The financial statements are presented in Singapore Dollars (SGD or $) and all values are rounded to the nearest $0.1
million except as otherwise stated.
2.2 Changes in Accounting Policies
2.2.1 The Group and the Company have applied the following FRS and INT FRS with effect from 1 January 2012:
FRS Title Effective date
(Annual periods beginning on or after)
FRS 107 Amendments to FRS 107 Disclosures – Transfers
of Financial Assets
1 July 2011
FRS 12 Amendments to FRS 12 – Deferred Tax: Recovery
of Underlying Assets
1 January 2012
The adoption of these standards and interpretations did not have any effect on the financial performance or
position of the Group, except as disclosed below.
Amendments to FRS 12 Deferred Tax: Recovery of Underlying Assets
On 1 January 2012, the Group adopted the Amendments to FRS 12 Deferred Tax: Recovery of Underlying
Assets.
NOTES TO THEFINANCIAL STATEMENTS
84 ANNUAL REPORT 2012 [ MORE TO LIFE ]
NOTES TO THEFINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.2 Changes in Accounting Policies (continued)
2.2.1 The Group and the Company have applied the following FRS and INT FRS with effect from 1 January 2012: (continued)
The Amendments to FRS 12 apply to the measurement of deferred tax liabilities and assets arising from
investment properties measured using the fair value model under FRS 40, Investment Property, including
investment property acquired in a business combination and subsequently measured using the fair value model.
For the purposes of measuring deferred tax, the Amendments introduce a rebuttable presumption that the
carrying amount of an investment property measured at fair value will be recovered entirely through sale. The
presumption can be rebutted if the investment property is depreciable and is held within a business model
whose objective is to consume substantially all of the economic benefits over time, rather than through sale.
The Group previously recognised deferred taxes on the change in fair value of investment properties on the
basis that the carrying amounts of the investment properties are recovered through use. The management has
assessed that the impact of the amendment to the financial statements is not material.
2.2.2 FRS and INT FRS not yet effective
The Group and the Company have not applied the following FRS and INT FRS that have been issued but which
are not yet effective:
FRS Title Effective date
(Annual periods beginning on or after)
FRS 1 Amendments to FRS 1 – Presentation of Items
of Other Comprehensive Income
1 July 2012
FRS 19 Employee Benefits 1 January 2013
FRS 113 Fair Value Measurement 1 January 2013
FRS 107 Amendments to FRS 107 Disclosures – Offsetting
of Financial Assets and Financial Liabilities
1 January 2013
Improvements to
FRSs 2012
- Amendment to FRS 1 – Presentation of Financial
Statements
- Amendment to FRS 16 – Property, Plant and
Equipment
- Amendment to FRS 32 – Financial Instruments:
Presentation
1 January 2013
FRS 27 Separate Financial Statements 1 January 2014
FRS 28 Investments in Associates and Joint Ventures 1 January 2014
FRS 110 Consolidated Financial Statements 1 January 2014
FRS 111 Joint Arrangements 1 January 2014
FRS 112 Disclosure of Interests in Other Entities 1 January 2014
FRS 32 Amendments to FRS 32 – Offsetting of Financial
Assets and Financial Liabilities
1 January 2014
85GREAT EASTERN HOLDINGS LIMITED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.2 Changes in Accounting Policies (continued)
2.2.2 FRS and INT FRS not yet effective (continued)
Except for the Amendments to FRS 1, FRS 110 and revised FRS 27, FRS 112 and FRS 113, the Directors
expect that the adoption of the other standards and interpretations above will have no material impact on the
financial statements in the period of initial application. The nature of the impending changes in accounting policy on
adoption of the Amendments to FRS 1, FRS 110 and revised FRS 27, FRS 112 and FRS 113 are described below.
Amendments to FRS 1 Presentation of Items of Other Comprehensive Income
The Amendments to FRS 1 Presentation of Items of Other Comprehensive Income (OCI) are effective for financial
periods beginning on or after 1 July 2012.
The Amendments to FRS 1 change the grouping of items presented in OCI. Items that could be reclassified to
profit or loss at a future point in time would be presented separately from items which will never be reclassified.
As the Amendments only affect the presentation of items that are already recognised in OCI, the Group does not
expect any impact on its financial position or performance upon adoption of this standard.
FRS 110 Consolidated Financial Statements and Revised FRS 27 Separate Financial Statements
FRS 110 and the revised FRS 27 are effective for financial periods beginning on or after 1 January 2014.
FRS 110 establishes a single control model that applies to all entities (including special purpose entities).
The changes introduced by FRS 110 will require management to exercise significant judgment to determine
which entities are controlled, and therefore are required to be consolidated by the Group, compared with the
requirements that were in FRS 27. Therefore, FRS 110 may change which entities are consolidated within a
group. The revised FRS 27 was amended to address accounting for subsidiaries, jointly controlled entities and
associates in separate financial statements.
The Group is currently determining the impact of the changes to control and expect that the adoption of FRS
110 in 2014 will likely lead to more entities being consolidated by the Group.
FRS 112 Disclosure of Interests in Other Entities
FRS 112 is effective for financial periods beginning on or after 1 January 2014.
FRS 112 is a new and comprehensive standard on disclosure requirements for all forms of interests in other
entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.
FRS 112 requires an entity to disclose information that helps users of its financial statements to evaluate the
nature and risks associated with its interests in other entities and the effects of those interests on its financial
statements. As this is a disclosure standard, it will have no impact on the financial position and financial
performance of the Group when implemented in 2014.
FRS 113 Fair Value Measurement
FRS 113 is effective for financial periods beginning on or after 1 January 2013.
FRS 113 provides a single source of guidance for all fair value measurements. FRS 113 does not change when
an entity is required to use fair value, but rather provides guidance on how to measure fair value under FRS when
fair value is required or permitted by FRS.
The Group is currently assessing the impact of FRS 113.
NOTES TO THEFINANCIAL STATEMENTS
86 ANNUAL REPORT 2012 [ MORE TO LIFE ]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.3 Basis of Consolidation and Business Combinations
2.3.1 Basis of Consolidation
Basis of consolidation from 1 January 2010The consolidated financial statements comprise the financial statements of the Company and its subsidiaries
as at the end of the reporting period. The financial statements of the subsidiaries used in the preparation of
the consolidated financial statements are prepared for the same reporting date as the Company. Consistent
accounting policies are applied to like transactions and events in similar circumstances. A list of the Company’s
significant subsidiaries is shown in Note 3.
All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group
transactions and dividends are eliminated in full.
Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control,
and continue to be consolidated until the date that such control ceases.
Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity
transaction. If the Group loses control over a subsidiary, it:
- De-recognises the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts at
the date when control is lost;
- De-recognises the carrying amount of any non-controlling interest;
- De-recognises the cumulative translation differences recorded in equity;
- Recognises the fair value of the consideration received;
- Recognises the fair value of any investment retained;
- Recognises any surplus or deficit in profit or loss;
- Re-classifies the Group’s share of components previously recognised in other comprehensive income to
profit or loss or retained earnings, as appropriate.
Basis of consolidation prior to 1 January 2010Certain of the above-mentioned requirements were applied on a prospective basis. The following differences,
however, are carried forward in certain instances from the previous basis of consolidation:
- Acquisition of non-controlling interests, prior to 1 January 2010, were accounted for using the parent entity
extension method, whereby, the difference between the consideration and the book value of the share of
the net assets acquired was recognised in goodwill.
- Losses incurred by the Group were attributed to the non-controlling interest until the balance was reduced
to nil. Any further losses were attributed to the Group, unless the non-controlling interest had a binding
obligation to cover these. Losses prior to 1 January 2010 were not reallocated between non-controlling
interest and the owners of the Company.
- Upon loss of control, the Group accounted for the investment retained at its proportionate share of net
asset value at the date control was lost.
NOTES TO THEFINANCIAL STATEMENTS
87GREAT EASTERN HOLDINGS LIMITED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.3 Basis of Consolidation and Business Combinations (continued)
2.3.2 Business Combinations
Business combinations from 1 January 2010Business combinations are accounted for by applying the acquisition method. Identifiable assets acquired and
liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the
services are received.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition
date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or
liability, will be recognised in accordance with FRS 39 either in profit or loss or as a change to other comprehensive
income. If the contingent consideration is classified as equity, it is not remeasured until it is finally settled within
equity.
In business combinations achieved in stages, previously held equity interests in the acquiree are remeasured to
fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss.
The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if
any) is recognised on the acquisition date at fair value, or at the non-controlling interest’s proportionate share of
the acquiree’s identifiable net assets.
Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount
of non-controlling interest in the acquiree (if any), and the fair value of the Group’s previously held equity interest
in the acquiree (if any), over the net fair value of the acquiree’s identifiable assets and liabilities is recorded as
goodwill. The accounting policy for goodwill is set out in Note 2.23. In instances where the latter amount
exceeds the former, the excess is recognised as gain on bargain purchase in profit or loss on the acquisition
date.
Business combinations prior to 1 January 2010In comparison to the above mentioned requirements, the following differences applied:
Business combinations are accounted for by applying the purchase method. Transaction costs directly
attributable to the acquisition formed part of the acquisition costs. The non-controlling interest (formerly known
as minority interest) was measured at the proportionate share of the acquiree’s identifiable net assets.
2.4 Subsidiaries
Subsidiaries are entities over which the Group has the power to govern the financial and operating policies so as to
obtain benefits from their activities.
In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less impairment
losses, if any.
NOTES TO THEFINANCIAL STATEMENTS
88 ANNUAL REPORT 2012 [ MORE TO LIFE ]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.5 Associates and Joint Ventures
Associates are entities over which the Group has significant influence. Joint ventures are contractual arrangements
whereby two or more parties undertake an economic activity that is subject to joint control, where the strategic
financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control.
Associates are equity accounted for from the date the Group obtains significant influence until the date the Group
ceases to have significant influence. Joint ventures are equity accounted for from the date the Group obtains joint
control until the date the Group ceases to have joint control.
The Group’s investments in associates and joint ventures are accounted for using the equity method. Under the equity
method, the investments in associates and joint ventures are carried in the balance sheet at cost plus post-acquisition
changes in the Group’s share of net assets of the associates and joint ventures. Goodwill relating to an associate or joint
venture is included in the carrying amount of the investment and is neither amortised nor tested individually for impairment.
Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the
cost of the investment is deducted from the carrying amount of the investment and is recognised as income as part of the
Group’s share of results of the associate or joint venture.
The profit or loss reflects the share of the results of operations of the associates and joint ventures. Where there has
been a change recognised in other comprehensive income by the associates or joint ventures, the Group recognises
its share of such changes in other comprehensive income. Unrealised gains and losses resulting from transactions
between the Group and the associate are eliminated to the extent of the interest in the associates.
The Group’s share of the profit or loss of its associates and joint ventures is the profit attributable to equity holders of
the associate or joint venture and, therefore is the profit or loss after tax and non-controlling interests in the subsidiaries
of associates.
When the Group’s share of losses in an associate or joint venture equals or exceeds its interest in the associate or joint
venture, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf
of the associate or joint venture.
After application of the equity method, the Group determines whether it is necessary to recognise an additional
impairment loss on the Group’s investment in its associates or joint ventures. The Group determines at each balance
sheet date whether there is any objective evidence that the investment in an associate or joint venture is impaired. If
this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of
the associate or joint venture and the respective carrying value and recognises the amount in the profit or loss.
The financial statements of the associates and joint ventures are prepared as of the same reporting date as the
Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.
Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and
recognises any retained investment at its fair value. Any difference between the carrying amount of the associate upon
loss of significant influence and the fair value of the aggregate of the retained investment and proceeds from disposal
is recognised in profit or loss.
NOTES TO THEFINANCIAL STATEMENTS
89GREAT EASTERN HOLDINGS LIMITED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.6 Transactions with Non-Controlling Interests
Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to shareholders of
the Company, and is presented separately in the Consolidated Profit and Loss Statement, Consolidated Statement of
Comprehensive Income and within equity in the Consolidated Balance Sheet, separately from Shareholders’ Equity.
Changes in the Company’s shareholders’ ownership interest in a subsidiary that do not result in a loss of control
are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-
controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference
between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or
received is recognised directly in equity and attributed to shareholders of the Company.
2.7 Foreign Currency Conversion and Translation
2.7.1 Functional and Presentation Currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the
primary economic environment in which the entity operates (“the functional currency”). The Group’s consolidated
financial statements are presented in Singapore dollars, which is also the Company’s functional and presentation
currency.
2.7.2 Transactions and Balances
Transactions in foreign currencies are measured in the respective functional currencies of the Company and its
subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating
those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are
translated at the rate of exchange ruling at the end of the reporting period. Non-monetary items that are
measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates
of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using
the exchange rates at the date when the fair value is determined.
Exchange differences arising on the settlement of monetary items or on translating monetary items at the end of
the reporting period are recognised in the Profit and Loss Statement or Revenue Statements except for exchange
differences arising on monetary items that form part of the Group’s net investment in foreign operations, which
are recognised initially in other comprehensive income and accumulated under foreign currency translation
reserve in equity. The foreign currency translation reserve is reclassified from equity to profit or loss of the Group
on disposal of the foreign operation. Exchange differences on non-monetary items such as equity investments
classified as available-for-sale financial assets are included in the fair value reserve in equity.
2.7.3 Consolidated Financial Statements
For consolidation purposes, the assets and liabilities of foreign operations are translated into Singapore dollars
at the rate of exchange ruling at the end of the reporting period. The Profit and Loss Statement and Revenue
Statements are translated at the exchange rates prevailing at the dates of the transactions. The exchange
differences arising from the translation are recognised in the Statement of Comprehensive Income, Life Assurance
Fund or General Insurance Fund as foreign currency translation reserve.
NOTES TO THEFINANCIAL STATEMENTS
90 ANNUAL REPORT 2012 [ MORE TO LIFE ]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.7 Foreign Currency Conversion and Translation (continued)
2.7.3 Consolidated Financial Statements (continued)
On disposal of a foreign operation, the cumulative amount of exchange differences recognised in other
comprehensive income relating to that particular foreign operation is recognised in the Profit and Loss Statement
or Revenue Statements as gain or loss on disposal of the operation.
In the case of a partial disposal without loss of control of a subsidiary that includes a foreign operation, the
proportionate share of the cumulative amount of the exchange differences is re-attributed to non-controlling
interest and is not recognised in profit and loss. For partial disposals of associates or jointly controlled entities
that are foreign operations, the proportionate share of the accumulated exchange differences is reclassified to
the Profit and Loss Statement or Revenue Statements.
2.8 Insurance Contracts
Insurance contracts are those contracts where the Group (the insurer) has accepted significant insurance risk
from another party (the policyholders) by agreeing to compensate the policyholders if a specified uncertain
future event (the insured event) adversely affects the policyholders. As a general guideline, the Group determines
whether it has significant insurance risk, by comparing benefits paid with benefits payable if the insured event did
not occur. Insurance contracts can also transfer financial risk.
Investment contracts are those contracts that transfer significant financial risk. Financial risk is the risk of a
possible future change in one or more of a specified interest rate, financial instrument price, commodity price,
foreign exchange rate, index of price or rates, credit rating or credit index or other variable, provided in the case
of a non-financial variable that the variable is not specific to a party to the contract.
Once a contract has been classified as an insurance contract, it remains an insurance contract for the remainder
of its lifetime, even if the insurance risk reduces significantly during this period, unless all rights and obligations are
extinguished or expire. Investment contracts can however be reclassified as insurance contracts after inception
if insurance risk becomes significant.
Insurance and investment contracts are further classified as being either with or without discretionary participating
features (“DPF”). DPF is a contractual right to receive, as a supplement to guaranteed benefits, additional benefits
that are:
For financial options and guarantees which are not closely related to the host insurance contract and/or
investment contract with DPF, bifurcation is required to measure these embedded derivatives separately at fair
value through the Revenue Statement. However, bifurcation is not required if the embedded derivative is itself
an insurance contract and/or investment contract with DPF, or if the host insurance contract and/or investment
contract itself is measured at fair value through the Revenue Statement.
NOTES TO THEFINANCIAL STATEMENTS
91GREAT EASTERN HOLDINGS LIMITED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.8 Insurance Contracts (continued)
(continued)
For the purpose of FRS 104, the Group adopts maximum policy benefits as the proxy for insurance risk and
cash surrender value as the proxy for realisable value of the insurance contract on surrender. The Group defines
insurance risk to be significant when the ratio of the insurance risk over the deposit component is not less than
105% of the deposit component at any point of the insurance contract in force. Based on this definition, all
policy contracts issued by insurance subsidiaries within the Group are considered insurance contracts as at the
balance sheet date.
The insurance subsidiaries within the Group write insurance contracts in accordance with the local Insurance
Regulations prevailing in the jurisdictions in which the insurance subsidiaries operate.
2.8.2 Types of Insurance Contracts
Insurance contract liabilities are classified into principal components as follows:
(a) Life Assurance Fund contract liabilities; comprising
- Participating Fund contract liabilities;
- Non-Participating Fund contract liabilities; and
- Investment Linked Fund contract liabilities.
(b) General Insurance Fund contract liabilities.
(c) Reinsurance contracts.
2.8.3 Deferred Acquisition Costs
The Group does not defer acquisition costs relating to its insurance contracts.
2.8.4 Life Assurance Contract Liabilities
Insurance contracts are recognised and measured in accordance with the terms and conditions of the respective
contracts and are based on guidelines laid down by the respective insurance regulations. Premiums, claims and
benefit payments, acquisition and management expenses and valuation of future policy benefit payments or
premium reserves as the case may be, are recognised in the Revenue Statements of the respective insurance
funds.
Life assurance liabilities are recognised when contracts are entered into and premiums are charged. These
liabilities are measured by using the gross premium valuation method. The liability is determined as the sum
of the present value of future guaranteed and, in the case of a participating policy, appropriate level of future
gross considerations arising from the policy discounted at the appropriate discount rate. The liability is based
on best estimate assumptions and with due regard to significant recent experience. An appropriate risk margin
allowance for adverse deviation from expected experience is made in the valuation of non-participating life
policies, the guaranteed benefit liabilities of participating life policies and liabilities of non-unit investment-linked
policies.
The liability in respect of a participating insurance contract is based on the higher of the guaranteed benefit
liabilities or the total benefit liabilities at the contract level derived as stated above.
NOTES TO THEFINANCIAL STATEMENTS
92 ANNUAL REPORT 2012 [ MORE TO LIFE ]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.8 Insurance Contracts (continued)
2.8.4 Life Assurance Contract Liabilities (continued)
In the case of life policies where part of, or all the premiums are accumulated in a fund, the accumulated
amounts, as declared to policyholders are shown as liabilities if the accumulated amounts are higher than the
amounts as calculated using the gross premium valuation method.
In the case of short-term life policies covering contingencies other than death or survival, the liability for such life
insurance contracts comprises the provision for unearned premiums and unexpired risks, together with provision
for claims outstanding, including an estimate of the incurred claims that have not yet been reported to the Group.
Adjustments to liabilities at each reporting date are recorded in the respective Revenue Statements. Profits
originating from margins for adverse deviations on run-off contracts are recognised in the Revenue Statements
over the lives of the contracts, whereas losses are fully recognised in the Revenue Statements during the first
year of run-off.
The liability is extinguished when the contract expires, is discharged or is cancelled.
The Group issues a variety of short and long duration insurance contracts which transfer risks from the
policyholders to the Group to protect policyholders from the consequences of insured events such as death,
disability, illness, accident, including survival. These contracts may transfer both insurance and investment risk
or insurance risk alone, from the policyholders to the Group.
For non-participating policy contracts, both insurance and investment risks are transferred from policyholders
to the Group. For non-participating policy contracts other than medical insurance policy contracts, the payout
to policyholders upon the occurrence of the insured event is pre-determined and the transfer of risk is absolute.
For medical insurance policy contracts, the payout is dependent on the actual medical costs incurred upon the
occurrence of the insured event.
Contracts which transfer insurance risk alone from policyholders to the Group are commonly known as investment
linked policies. As part of the pricing for these contracts, the insurance subsidiaries within the Group include
certain charges and fees to cover for expenses and insured risk. The net investment returns derived from the
variety of investment funds as selected by the policyholders accrue directly to the policyholders.
A significant portion of insurance contracts issued by subsidiaries within the Group contain discretionary
participating features. These contracts are classified as participating policies. In addition to guaranteed benefits
payable upon insured events associated with human life such as death or disability, the contracts entitle the
policyholder to receive benefits, which could vary according to investment performance of the fund. The Group
does not recognise the guaranteed components separately from the discretionary participating features.
NOTES TO THEFINANCIAL STATEMENTS
93GREAT EASTERN HOLDINGS LIMITED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.8 Insurance Contracts (continued)
2.8.4 Life Assurance Contract Liabilities (continued)
The valuation of insurance contract liabilities is determined according to:
(a) Singapore Insurance Act (Chapter 142), Insurance (Valuation and Capital) Regulations 2004 for insurance
funds regulated in Singapore (“MAS Regulations”); and
(b) Malaysia Insurance Act and Regulations 1996 and Risk-Based Capital Framework for Insurers for insurance
funds regulated in Malaysia.
Each insurance subsidiary within the Group is required by the Insurance Regulations and accounting standards
to carry out a liability adequacy test using current estimates of future cash flows relating to its insurance
contracts; the process is referred to as the gross premium valuation or bonus reserve valuation, depending on
the jurisdiction in which the insurance subsidiary operates.
The liability adequacy test is applied to both the guaranteed benefits and the discretionary participating features;
the assumptions are based on best estimates, the basis adopted is prescribed by the Insurance Regulations
of the respective jurisdiction in which the insurance subsidiary operates. The Group performs liability adequacy
tests on its actuarial reserves to ensure that the carrying amount of provisions is sufficient to cover estimated
future cash flows. When performing the liability adequacy test, the Group discounts all contractual cash flows
and compares this amount against the carrying value of the liability. Any deficiency is charged to the Revenue
Statement.
The Group issues investment linked contracts as an insurance contract which insure human life events such
as death or survival over a long duration; coupled with an embedded derivative linking death benefit payments
on the contract to the value of a pool of investments within the investment linked fund set up by the insurance
subsidiary. As this embedded derivative meets the definition of an insurance contract it need not be separately
accounted for from the host insurance contract. The liability valuation for such contracts is adjusted for changes
in the fair value of the underlying assets at frequencies in accordance with the terms and conditions of the
insurance contracts.
NOTES TO THEFINANCIAL STATEMENTS
94 ANNUAL REPORT 2012 [ MORE TO LIFE ]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.8 Insurance Contracts (continued)
2.8.4 Life Assurance Contract Liabilities (continued)
TABLE 2.8 below provides the key underlying assumptions used for valuation of life insurance contract liabilities.
SINGAPORE MALAYSIA
Valuation
Method
Gross Premium Valuation
For Participating Fund, the method that
produces the higher reserves of:
(i) Total assets backing policy benefits;
(ii) Guaranteed and non-guaranteed
cashflows discounted at the appropriate
rate of return reflecting the strategic asset
allocation; and
(iii) Guaranteed cashflows discounted using
the interest rate outlined under (i) below.
Gross Premium Valuation
For Participating Fund, the method that
produces the higher reserves of:
(i) Guaranteed and non-guaranteed
cashflows discounted at the appropriate
rate of return reflecting the strategic asset
allocation; and
(ii) For guaranteed cashflows, Malaysia
Government Securities zero coupon spot
yields (as outlined below).
Interest
Rate (Note 1)
(i) Singapore Government Securities zero
coupon spot yields for cash flows up to
year 15, an interpolation of the 15-year
Singapore Government Securities zero
coupon spot yield and the Long Term
Risk Free Discount Rate (LTRFDR) for
cash flows between 15 to 20 years, and
the LTRFDR for cash flows year 20 and
after.
(ii) For the fair value hedge portfolio,
Singapore Government Securities zero
coupon spot yields for cash flows up to
year 30, the 30 year rate for cash flows
beyond 30 years. Interpolation for years
where rates are unavailable.
Malaysia Government Securities yields
determined based on the following:
(i) For cashflows with duration less than 15
years, Malaysia Government Securities
zero coupon spot yields of matching
duration.
(ii) For cashflows with duration 15 years or
more, Malaysia Government Securities
zero coupon spot yields of 15 years to
maturity.
Mortality,
Disability,
Dread
disease,
Expenses,
Lapse and
surrenders
Best estimates plus provision for adverse
deviation (PADs).
Participating Fund, the method that produces
the higher reserves of:
(i) Best estimates for total benefits (i.e.
guaranteed and non-guaranteed
cashflows), and
(ii) Best estimates plus provision for risk of
adverse deviation (PRADs) for guaranteed
cashflows only.
Non-Participating and Non-Unit reserves of
Investment Linked Fund:
Best estimates plus provision for risk of
adverse deviation (PRADs).
NOTES TO THEFINANCIAL STATEMENTS
95GREAT EASTERN HOLDINGS LIMITED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.8 Insurance Contracts (continued)
2.8.5 General Insurance Fund Contract Liabilities
The Group issues short term property and casualty contracts which protect the policyholder against the risk of
loss of property premises due to fire or theft in the form of fire or burglary insurance contracts and/or business
interruption contracts; risk of liability to pay compensation to a third party for bodily harm or property damage in
the form of public liability insurance contracts. The Group also issues short term medical and personal accident
general insurance contracts.
General insurance contract liabilities include liabilities for outstanding claims and unearned premiums.
Outstanding claims provisions are based on the estimated ultimate cost of all claims incurred but not settled
at the balance sheet date, whether reported or not, together with related claims handling costs and reduction
for the expected value of salvage and other receivables. Delays can be experienced in the notification and
settlement of certain types of claims, therefore, the ultimate cost of these claims cannot be known with certainty
at the balance sheet date. The liability is calculated at the reporting date using a range of standard actuarial
projection techniques based on empirical data and current assumptions that may include a margin for adverse
deviation. The liability is not discounted for the time value of money. No provision for equalisation or catastrophe
reserves is recognised. The liabilities are derecognised when contracts expire, are discharged or are cancelled.
The provision for unearned premiums represents premiums received for risks that have not yet expired at the
reporting date. The provision is recognised when contracts are entered into and premiums are charged. The
provision is released over the terms of the contracts and is recognised as premium income.
The valuation of general insurance contract liabilities at balance sheet date is based on best estimates of the
ultimate settlement cost of claims plus a provision for adverse deviation. For both Singapore and Malaysia,
as required by the local Insurance Regulations, the provision for adverse deviation is set at 75% sufficiency.
For Singapore, the valuation methods used include the Paid Claim Development method, the Incurred Claim
Development method, the Paid Bornhuetter-Ferguson Method and the Incurred Bornhuetter-Ferguson Method.
For Malaysia, the valuation methods used include the Link Ratio Method, the Bornhuetter-Ferguson Method and
the Loss Ratio Method.
2.8.6 Reinsurance Contracts
The Group cedes insurance risk in the normal course of business for all of its businesses. Reinsurance assets
represent balances due from reinsurers. These amounts are estimated in a manner consistent with the outstanding
claims provision or settled claims associated with the reinsurer’s policies and are in accordance with the related
reinsurance contract.
Reinsurance assets are reviewed for impairment at each reporting date or more frequently when an indication
of impairment arises during the financial period. Impairment occurs when there is objective evidence as a result
of an event that occurred after initial recognition of the reinsurance asset that the Group may not receive part or
all outstanding amounts due under the terms of the contract. The impairment loss is recorded in the Revenue
Statement. Gains or losses on reinsurance are recognised in the Revenue Statement immediately at the date of
contract and are not amortised. Ceded reinsurance arrangements do not relieve the Group from its obligations
to policyholders.
NOTES TO THEFINANCIAL STATEMENTS
96 ANNUAL REPORT 2012 [ MORE TO LIFE ]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.8 Insurance Contracts (continued)
2.8.6 Reinsurance Contracts (continued)
The Group also assumes reinsurance risk in the normal course of business for life insurance and non-life
insurance contracts where applicable. Premiums and claims on assumed reinsurance are recognised as revenue
or expenses in the same manner as they would be if the reinsurance were considered direct business, taking
into account the product classification of the reinsured business. Reinsurance liabilities represent balances due
to reinsurance companies. Amounts payable are estimated in a manner consistent with the related reinsurance
contract. Premiums and claims are presented on a gross basis for both ceded and assumed reinsurance.
Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or expire or when
the contract is transferred to another party.
2.9 Profit from Insurance Funds
Profit derived from the insurance funds is categorised as follows:
2.9.1 Life Assurance – Participating Fund
Profits to shareholders from the participating fund are allocated from the surplus or surplus capital, determined
from the results of the annual actuarial valuation (such valuation also determines the liabilities relating to all the
policyholders’ benefits of the participating fund) parameters which are set out in the Insurance Regulations
of the respective jurisdiction in which the insurance subsidiaries operate. The provisions in the Articles of
Association of the insurance subsidiaries within the Group are applied in conjunction with the prescriptions in the
respective Insurance regulations, such that the distribution for any year to policyholders of the participating fund
and shareholders approximate 90% and 10% respectively of total distribution from the participating fund. The
annual declaration of the quantum of policyholder bonus and correspondingly the profits to shareholders to be
distributed out of the participating fund is approved by the Board of Directors of each insurance subsidiary under
the advice of the Appointed Actuary of the respective insurance subsidiary, in accordance with the Insurance
Regulations and the Articles of Association of the respective insurance subsidiaries.
2.9.2 Life Assurance – Non-Participating Fund
Revenue consists of premiums, investment and interest income; including fair value movements of certain assets
as prescribed by the appropriate Insurance Regulations. Expenses include reinsurance costs, acquisition costs,
benefit payments and management expenses. Profit or loss from the non-participating fund is determined from
the revenue and expenses of the non-participating fund and the results of the annual actuarial valuation of the
liabilities in accordance with the requirements of the Insurance Regulations of the respective jurisdictions in
which the insurance subsidiaries operate. In addition, profit transfers from the Singapore and Malaysia non-
participating funds include the fair value change of asset values measured in accordance with the Insurance
Regulations of the respective insurance subsidiaries.
2.9.3 Life Assurance – Investment-Linked Fund
Revenue essentially consists of bid-ask spread and fees for mortality and other insured events, asset management,
policy administration and surrender charges. Expenses include reinsurance costs, acquisition costs, benefit
payments and management expenses. Profit is derived from revenue net of expenses and provision for the
annual actuarial valuation of liabilities in accordance with the requirements of the Insurance Regulations, in
respect of the non-unit-linked part of the fund.
NOTES TO THEFINANCIAL STATEMENTS
97GREAT EASTERN HOLDINGS LIMITED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.9 Profit from Insurance Funds (continued)
2.9.4 General Insurance Fund
Revenue consists of premiums and investment income. Expenses include reinsurance costs, acquisition
costs, benefit payments and management expenses. Loss reserves or reserves for claims incurred but not
reported are reviewed and provisions made at each reporting date. The sum of premium, expenses and
reserves is underwriting performance for the period. Investment and interest income include changes in fair
value of assets valued in accordance with the requirements of the appropriate Insurance Regulations. Profit or
loss from the General Insurance Fund is derived from the sum of underwriting and investment performance.
2.10 Recognition of Income and Expense
2.10.1 Premiums and Commissions
Recurring premiums from policyholders are recognised as revenue on their respective payment due dates.
Single premiums are recognised on the dates on which the policies are effective. Premiums from the
investment-linked business are recognised as revenue when payment is received.
General Insurance BusinessPremiums from the general insurance business are recognised as revenue upon commencement of insurance
cover, in the General Insurance Revenue Statement. Premiums pertaining to periods outside of the financial
reporting period are adjusted through the movement in unexpired risk reserve. Commission is recognised as
an expense when incurred, typically upon the risk underwritten as reflected in the premium recognised.
Premiums ceded out and the corresponding commission income from general insurance contracts are
recognised in the General Insurance Revenue Statement upon receipt of acceptance confirmation from the
ceding company or in accordance with provisions incorporated in the treaty contracts. Premiums ceded out
pertaining to periods outside of the financial reporting period are adjusted through the movement in unexpired
risk reserve.
2.10.2 Interest Income
Interest income is recognised using the effective interest method.
2.10.3 Dividend Income
Dividend income is recognised as investment income when the Group’s right to receive the payment is
established. Dividend income from the Company’s subsidiaries is recognised when the dividend is declared
payable.
2.10.4 Rental Income
Rental income from operating leases is recognised on a straight-line basis over the lease term. The aggregate
cost of incentives provided to lessees is recognised as a reduction of rental income over the lease term on a
straight-line basis.
NOTES TO THEFINANCIAL STATEMENTS
98 ANNUAL REPORT 2012 [ MORE TO LIFE ]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.10 Recognition of Income and Expense (continued)
2.10.5 Gain/Loss on Sale of Investments
Gains or losses on sale of investments are derived from the difference between net sales proceeds and the
purchase or amortised cost. They are recognised on trade date.
2.10.6 Impairment of Non-Financial Assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired.
If any indication exists, or when an annual impairment test for an asset is required, the Group makes an
estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell
and its value-in-use and is determined for an individual asset, unless the asset does not generate cash inflows
that are largely independent of those from other assets or groups of assets. Where the carrying amount of
an asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is
written down to its recoverable amount. In assessing value-in-use, the estimated future cash flows expected
to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. In determining fair
value less costs to sell, recent market transactions are taken into account, if available. If no such transactions
can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation
multiples or other available fair value indicators.
The Group bases its impairment calculation on detailed budgets and forecast calculations which are prepared
separately for each of the Group’s cash-generating units to which the individual assets are allocated. These
budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term
growth rate is calculated and applied to projected future cash flows after the fifth year.
Impairment losses on continuing operations are recognised in the Revenue Statements or Profit and Loss
Statement.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses recognised for an asset may no longer exist or may
have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised
impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s
recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of
the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would
have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior
years. Reversal of an impairment loss is recognised in the Revenue Statements or Profit and Loss Statement.
2.10.7 Impairment of Financial Assets
The Group assesses at each reporting date whether there is any objective evidence that a financial asset or
a group of financial assets is impaired.
NOTES TO THEFINANCIAL STATEMENTS
99GREAT EASTERN HOLDINGS LIMITED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.10 Recognition of Income and Expense (continued)
2.10.7 Impairment of Financial Assets (continued)
(a) Financial assets carried at amortised cost
For financial assets carried at amortised cost, the Group first assesses whether objective evidence
of impairment exists individually for financial assets that are individually significant, or collectively for
financial assets that are not individually significant. If the Group determines that no objective evidence
of impairment exists for an individually assessed financial asset, whether significant or not, it includes
the asset in a group of financial assets with similar credit risk characteristics and collectively assesses
them for impairment. Assets that are individually assessed for impairment and for which an impairment
loss is, or continues to be recognised are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss on financial assets carried at amortised cost has
been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount
and the present value of estimated future cash flows discounted at the financial asset’s original effective
interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss
is the current effective interest rate. The carrying amount of the asset is reduced through the use of
an allowance account. The impairment loss is recognised in the Profit and Loss Statement or Revenue
Statements.
When the asset becomes uncollectible, the carrying amount of impaired financial assets is reduced
directly or if an amount was charged to the allowance account, the amount charged to the allowance
account is written off against the carrying value of the financial asset.
To determine whether there is objective evidence that an impairment loss on financial assets has been
incurred, the Group considers factors such as the probability of insolvency or significant financial
difficulties of the debtor and default or significant delay in payments.
If in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognised, the previously recognised
impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its
amortised cost at the reversal date. The amount of reversal is recognised in the Revenue Statements
or Profit and Loss Statement.
(b) Financial assets carried at cost
If there is objective evidence (such as significant adverse changes in the business environment where
the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an
impairment loss on financial assets carried at cost has been incurred, the amount of the loss is measured
as the difference between the asset’s carrying amount and the present value of estimated future cash
flows discounted at the current market rate of return for a similar financial asset. Such impairment
losses are not reversed in subsequent periods.
NOTES TO THEFINANCIAL STATEMENTS
100 ANNUAL REPORT 2012 [ MORE TO LIFE ]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.10 Recognition of Income and Expense (continued)
2.10.7 Impairment of Financial Assets (continued)
In the case of equity investments classified as available-for-sale, objective evidence of impairment
include (i) significant financial difficulty of the issuer or obligor; (ii) information about significant changes
with an adverse effect that have taken place in the technological, market, economic or legal environment
in which the issuer operates, which indicates that the cost of the investment in equity instrument may
not be recovered; and (iii) a significant or prolonged decline in the fair value of the investment below its
cost. ‘Significant’ is to be evaluated against the original cost of the investment and ‘prolonged’ against
the period for which the fair value has been below its original cost.
If an available-for-sale financial asset is impaired, an amount comprising the difference between its
acquisition cost (net of any principal repayment and amortisation) and its current fair value, less any
impairment loss previously recognised in the Revenue Statements or Profit and Loss Statement, is
transferred from other comprehensive income and recognised in the Revenue Statements or Profit and
Loss Statement. Reversals of impairment losses in respect of equity instruments are not recognised in
the Revenue Statements or Profit and Loss Statement; increases in their fair value after impairment are
recognised directly in other comprehensive income.
In the case of debt instruments classified as available-for-sale, impairment is assessed based on the
same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment
is the cumulative loss measured as the difference between the amortised cost and the current fair value,
less any impairment loss on that investment previously recognised in profit or loss.
Future interest income continues to be accrued based on the reduced carrying amount of the asset,
using the rate of interest used to discount the future cash flows for the purpose of measuring the
impairment loss. If, in a subsequent year, the fair value of a debt instrument increases and the increase
can be objectively related to an event occurring after the impairment loss was recognised in the Revenue
Statements or Profit and Loss Statement, the impairment loss is reversed in the Revenue Statements
or Profit and Loss Statement.
2.10.8 Fees and Other Income
Fees and other income comprise mainly of management and advisory fee income. Management and advisory
fee income includes income earned from the provision of administration services, investment management
services, surrenders and other contract fees. This fee income is recognised as revenue over the period in
which the services are rendered. If the fees are for services to be provided in future periods, then they are
deferred and recognised over those periods.
NOTES TO THEFINANCIAL STATEMENTS
101GREAT EASTERN HOLDINGS LIMITED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.10 Recognition of Income and Expense (continued)
The Group participates in the national pension schemes as defined by the laws of the countries in which it has
operations. In particular, the Singapore and Malaysia companies in the Group make contributions respectively to
the Central Provident Fund and Employees’ Provident Fund, which are defined contribution pension schemes.
These contributions are recognised as an expense in the period in which the service is rendered.
An employee’s entitlement to annual leave and long-service leave is estimated and accrued according to the
Group’s Human Resource policy.
Share OptionsSenior executives of the Group are granted share options in the OCBC Bank’s Share Option Scheme as
consideration for services rendered. Options granted generally vest in one-third increments over a 3-year
period and expire between 5 and 10 years from date of grant. The cost of these equity-settled share based
payment transactions with the senior executives is measured by reference to the fair value of the options
at the date on which the options are granted which takes into account market conditions and non-vesting
conditions. The cost is recognised in the Profit and Loss Statement or Revenue Statements of the respective
insurance funds, with a corresponding increase in the intercompany balance with the holding company, over
the vesting period.
The cumulative expense recognised at each reporting date until the vesting date reflects the extent to which
the vesting period has expired and the Group’s best estimate of the number of options that will ultimately vest.
The charge or credit to profit or loss for a period represents the movement in cumulative expense recognised
as at the beginning and end of that period.
No expense is recognised for options that do not ultimately vest, except for options where vesting is
conditional upon a market or non-vesting condition, which are treated as vested irrespective of whether or
not the market condition or non-vesting condition is satisfied, provided that all other performance and/or
service conditions are satisfied. In the case where the option does not vest as a result of a failure to meet a
non-vesting condition that is within the control of the Group or the senior executives, it is accounted for as a
cancellation. In such case, the amount of the compensation cost that otherwise would be recognised over
the remainder of the vesting period is recognised immediately in the Profit and Loss Statement or Revenue
Statements upon cancellation.
Deferred Share PlanIn addition to the OCBC Bank’s Share Option Scheme, certain employees within the Group are granted
OCBC shares under the OCBC Deferred Share Plan (“DSP”). There are 2 types of deferred share awards.
Deferred share awards granted as part of long term incentive compensation will vest three years from the grant
date and will lapse if the staff ceases employment during the vesting period. For deferred share awards granted
as part of variable performance bonus, half of the share awards will vest two years from the grant date and the
remaining half will vest at the end of three years from the grant date. The cost of the DSP is recognised in the
Profit and Loss Statement or Revenue Statements on the straight-line basis over the vesting period of the DSP.
At each balance sheet date, the cumulative expense is adjusted for the estimated number of shares granted
under the DSP that have vested and/or lapsed.
NOTES TO THEFINANCIAL STATEMENTS
102 ANNUAL REPORT 2012 [ MORE TO LIFE ]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.10 Recognition of Income and Expense (continued)
2.10.10 Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of the
arrangement at inception date: whether fulfilment of the arrangement is dependent on the use of a specific
asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified
in an arrangement. For arrangements entered into prior to 1 January 2005, the date of inception is deemed
to be 1 January 2005 in accordance with the transitional requirements of INT FRS 104.
Leases where the Group retains substantially all the risks and rewards of ownership of the leased item are
classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the
carrying amount of the leased asset and recognised over the lease term. The accounting policy for rental
income is set out in Note 2.10.4.
Operating lease payments are recognised as an expense in the Profit and Loss Statement or Revenue
Statements on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the
lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.
2.11 Taxes
2.11.1 Current Income Tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected
to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted at the end of the reporting period, in the countries
where the Group operates and generates taxable income.
Current income taxes are recognised in profit or loss except to the extent that the tax relates to items
recognised outside profit or loss, either in other comprehensive income or directly in equity. Management
periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax
regulations are subject to interpretation and establishes provisions where appropriate.
2.11.2 Deferred Tax
Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date
between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences. Exceptions include:
a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled
and it is probable that the temporary differences will not reverse in the foreseeable future.
NOTES TO THEFINANCIAL STATEMENTS
103GREAT EASTERN HOLDINGS LIMITED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.11 Taxes (continued)
2.11.2 Deferred Tax (continued)
Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax
credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which
the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can
be utilised except:
initial recognition of an asset or liability in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable
that the temporary differences will reverse in the foreseeable future and taxable profit will be available
against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax
asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and
are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax
asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates expected to apply to taxable income in the
year when the asset is realised or the liability is settled, based on tax rates (and applicable tax laws and
jurisdictions) that have been enacted or substantively enacted at the balance sheet date.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred
tax items are recognised in correlation to the underlying transaction either in other comprehensive income
or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on
acquisition.
Deferred tax assets and liabilities are offset, if a legally enforceable right exists to set off current income tax
assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the
same taxation authority.
Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition
at that date, would be recognised subsequently if new information about facts and circumstances changed.
The adjustment would either be treated as a reduction to goodwill (as long as it does not exceed goodwill) if
it is incurred during the measurement period or in profit or loss.
NOTES TO THEFINANCIAL STATEMENTS
104 ANNUAL REPORT 2012 [ MORE TO LIFE ]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.11 Taxes (continued)
2.11.3 Sales Tax
Revenues, expenses and assets are recognised net of the amount of sales tax except where the sales tax
incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case
the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as
applicable. Receivables and payables are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of
receivables or payables in the balance sheet.
2.12 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event,
where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation
and the amount of the obligation can be estimated reliably.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer
probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If
the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects,
where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the
passage of time is recognised as a finance cost.
2.13 Unexpired Risk Reserve
Unexpired Risk Reserve (“URR”) represents the portion of the written premiums of general insurance policies, gross
of commission payable to intermediaries attributable to periods after the financial period, in the form of unearned
premium. The change in the provision for unearned premium is taken to the Revenue Statements in order that revenue
is recognised over the period of risk exposure. Further provisions are made for claims anticipated under unexpired
insurance contracts which may exceed the unearned premiums and the premiums due in respect of these contracts.
URR is computed using the 1/24th method and is reduced by the corresponding percentage of gross direct business,
commissions and agency related expenses not exceeding limits specified by regulators in the respective jurisdictions
in which the Group operates.
2.14 Policy Benefits
Policy benefits are recognised when the policyholder exercises the option to deposit the survival benefits with the
life assurance subsidiary companies when the benefit falls due. Policy benefits are interest bearing at rates adjusted
from time to time by the life assurance subsidiary companies. Interest payable on policy benefits is recognised in the
Revenue Statements as incurred.
2.15 Claims Admitted or Intimated
Full provision is made for the estimated cost of all life assurance claims notified but not settled at balance sheet date.
Provision is made for estimated claims incurred but not reported for all classes of general insurance business written.
NOTES TO THEFINANCIAL STATEMENTS
105GREAT EASTERN HOLDINGS LIMITED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.16 Cash and Cash Equivalents
Cash and cash equivalents comprise cash at bank and on hand, demand deposits and short-term, highly liquid
investments with maturity of three months or less that are readily convertible to a known amount of cash and which
are subject to an insignificant risk of changes in value.
2.17 Insurance Receivables
Insurance receivables are recognised when due. They are measured at initial recognition at the fair value received
or receivable. Subsequent to initial recognition, insurance receivables are measured at amortised cost, using the
effective interest method. The carrying value of insurance receivables is reviewed for impairment whenever events or
circumstances indicate that the carrying amount may not be recoverable, with the impairment loss recognised in the
Revenue Statements. Insurance receivables are derecognised when the derecognition criteria for financial assets, as
described in Notes 2.18 and 2.22 have been met.
2.18 Financial Assets
Initial recognition and measurementFinancial assets are recognised when, and only when, the Group becomes a party to the contractual obligations of
the financial asset. The Group determines the classification of its financial assets at initial recognition. When financial
assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value
through profit or loss, directly attributable transaction costs.
Subsequent measurement The subsequent measurement of financial assets depends on their classification as follows:
Loss Statement
Financial assets at fair value through Revenue Statements of Insurance Funds and Profit and Loss Statement
include financial assets held for trading and financial assets designated upon initial recognition at fair value
through profit or loss. Financial assets held for trading are derivatives, financial instruments with embedded
derivatives or assets acquired principally for the purpose of selling in the short term and are not designated
as hedging instruments in hedge relationships as defined by FRS 39.
Investments held by the investment-linked funds are designated as fair value through profit and loss
at inception as they are managed and evaluated on a fair value basis, in accordance with the respective
investment strategy and mandate.
Derivatives are financial instruments or contracts where the values vary according to changes in interest rate,
foreign exchange rate, credit spreads or other variable. The Group uses derivatives such as interest rate
swaps and foreign exchange contracts for risk mitigation. Financial instruments with embedded derivatives
are hybrid financial instruments that include also a non-derivative host contract.
Subsequent to initial recognition, financial assets at fair value through Revenue Statements of Insurance
Funds and Profit and Loss Statement are measured at fair value. Any gains or losses arising from changes in
fair value of the financial assets are recognised in the Revenue Statements of Insurance Funds or Profit and
Loss Statement.
NOTES TO THEFINANCIAL STATEMENTS
106 ANNUAL REPORT 2012 [ MORE TO LIFE ]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.18 Financial Assets (continued)
2.18.2 Loans and Receivables
Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market
are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured
at amortised cost using the effective interest method, less impairment. Gains and losses are recognised in the
Revenue Statements of Insurance Funds and Profit and Loss Statement when the loans and receivables are
derecognised or impaired, and through the amortisation process.
2.18.3 Available-for-sale Financial Assets
Available-for-sale financial assets include equity and debt securities. Equity investments classified as available-
for-sale are those, which are neither classified as held for trading nor designated at fair value through profit or
loss. Debt securities in this category are those which are intended to be held for an indefinite period of time
and which may be sold in response to needs for liquidity or in response to changes in the market conditions.
After initial recognition, available-for-sale financial assets are subsequently measured at fair value. Any gains
or losses from changes in fair value of the financial assets are recognised in the fair value reserve in the
Statement of Comprehensive Income or Insurance Funds, except that impairment losses, foreign exchange
gains and losses on monetary instruments and interest calculated using the effective interest method are
recognised in the Revenue Statements of Insurance Funds or Profit and Loss Statement accordingly. The
cumulative gain or loss previously recognised in equity is recognised in the Revenue Statements of Insurance
Funds and Profit and Loss Statement when the financial asset is derecognised.
Unquoted equity securities whose fair value cannot be reliably measured are measured at cost less impairment
losses.
DerecognitionA financial asset is derecognised where the contractual right to receive cash flows from the asset has expired. On
derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the
consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is
recognised in the Revenue Statements of Insurance Funds and Profit and Loss Statement.
All regular way purchases and sales of financial assets are recognised or derecognised on trade date i.e., the date
that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of
financial assets that require delivery of assets within the period generally established by regulation or convention in the
marketplace concerned.
NOTES TO THEFINANCIAL STATEMENTS
107GREAT EASTERN HOLDINGS LIMITED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.19 Hedge Accounting
The Group applies hedge accounting for hedges of net investments in foreign operations. At the inception of a hedging
relationship, the Group formally designates and documents the hedging relationship to which the Group wishes to apply
hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation
includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged
and how the entity will assess the effectiveness of changes in the hedging instrument’s fair value in offsetting the
exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are
expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an
ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for
which they were designated.
For hedges of net investments in foreign operations, gains or losses on the hedging instrument relating to the effective
portion of the hedge are recognised as other comprehensive income while any gains or losses relating to the ineffective
portion are recognised in the Profit and Loss Statement or Revenue Statements. On disposal of the foreign operation,
the cumulative value of any such gains or losses recorded in equity is transferred to the Profit and Loss Statement or
Revenue Statements.
The Group uses forward currency contracts as hedges of its exposure to foreign exchange risk on its investments in
foreign subsidiaries.
2.20 Financial Liabilities
Initial recognition and measurementFinancial liabilities within the scope of FRS 39 are recognised when, and only when the Group becomes a party to the
contractual obligations of the financial instrument. The Group determines the classification of its financial liabilities at
initial recognition.
All financial liabilities are recognised initially at fair value, plus, in the case of financial liabilities other than derivatives,
directly attributable transaction costs.
The Group’s financial liabilities include other creditors and interfund payables, insurance payables and insurance
contract liabilities.
Subsequent measurementThe measurement of financial liabilities depends on their classification as follows:
Financial liabilities at fair value through profit or loss include financial liabilities held for trading. Financial
liabilities held for trading are acquired for the purpose of selling in the near term and includes derivative
financial instruments entered into by the Group that are not designated as hedging instruments in hedge
relationships.
Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair
value. Any gains or losses arising from changes in fair value of the financial liabilities are recognised in the
Profit and Loss Statement or Revenue Statements.
NOTES TO THEFINANCIAL STATEMENTS
108 ANNUAL REPORT 2012 [ MORE TO LIFE ]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.20 Financial Liabilities (continued)
2.20.2 Other Financial Liabilities
After initial recognition, other financial liabilities (except for financial guarantees) are subsequently measured
at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when
the liabilities are derecognised, and through the amortisation process.
DerecognitionA financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial
liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and
the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the Profit and
Loss Statement or Revenue Statements.
2.21 Determination of Fair Value of Financial Instruments
The fair value of financial instruments that are actively traded in organised financial markets is determined by reference
to quoted or published bid prices on the balance sheet date. If quoted prices are not available over the counter, broker
or dealer price quotations are used.
For units in unit trusts and shares in open-ended investment companies, fair value is determined by reference to
published bid-values.
For financial instruments where there is no active market, the fair value is determined by using valuation techniques.
Such techniques include using recent arm’s length transactions, reference to the current market value of another
instrument which is substantially the same, discounted cash flow analysis and/or option pricing models. For discounted
cash flow techniques, estimated future cash flows are based on management’s best estimates and the discount rate
is a market-related rate for a similar instrument. Certain financial instruments, including derivative financial instruments,
are valued using pricing models that consider, among other factors, contractual, and market prices, correlation, time
value of money, credit risk, yield curve volatility factors and/or prepayment rates of the underlying positions. The use of
different pricing models and assumptions could produce materially different estimates of fair values.
The fair value of floating rate and overnight deposits with financial institutions is their carrying value. The carrying cost
is the cost of the deposit and accrued interest. The fair value of fixed interest-bearing deposits is estimated using
discounted cash flow techniques. Expected cash flows are discounted at current market rates for similar instruments
at the balance sheet date.
If the fair value cannot be measured reliably, these financial instruments are measured at cost, being the fair value of
the consideration paid for the acquisition of the investment or the amount received on issuing the financial liability. All
transaction costs directly attributable to the acquisition are also included in the cost of the investment.
NOTES TO THEFINANCIAL STATEMENTS
109GREAT EASTERN HOLDINGS LIMITED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.22 Financial Instruments: Derecognition of Financial Assets and Liabilities
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is
derecognised where:
pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or
all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and
rewards of the asset, but has transferred control of the asset.
Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained
substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the
extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee
over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum
amount of consideration that the Group could be required to repay.
Where continuing involvement takes the form of a written and/or purchased option on the transferred asset, the
extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase,
except that in the case of a written put option on an asset measured at fair value, the extent of the Group’s continuing
involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.
2.23 Goodwill
Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated
impairment losses.
For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date,
allocated to each of the Group’s cash-generating units that are expected to benefit from the synergies of the
combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there
is an indication that the cash-generating unit may be impaired. Impairment is determined for goodwill by assessing
the recoverable amount of each cash-generating unit (or group of cash-generating units) to which the goodwill relates.
Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is
recognised in the Revenue Statements or Profit and Loss Statement. Impairment losses recognised for goodwill are
not reversed in subsequent periods.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill
associated with the operation disposed of is included in the carrying amount of the operation when determining the
gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative
fair values of the operations disposed of and the portion of the cash-generating unit retained.
NOTES TO THEFINANCIAL STATEMENTS
110 ANNUAL REPORT 2012 [ MORE TO LIFE ]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.23 Goodwill (continued)
Goodwill and fair value adjustments which arose on acquisitions of foreign subsidiaries before 1 January 2005 are
deemed to be assets and liabilities of the parent company and are recorded in SGD at the rates prevailing at the date
of acquisition.
Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2005 are
treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign
operations and translated at the closing rate at the balance sheet date.
2.24 Assets Held For Sale
Non-current assets are classified as held for sale if their carrying amounts will be recovered principally through a
sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly
probable and the asset is available for immediate sale in its present condition. Management must be committed to
the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of the
classification.
2.25 Property, Plant and Equipment
All items of property, plant and equipment are initially recorded at cost. Such cost includes the cost of replacing part of
the property, plant and equipment. The cost is recognised as an asset, if and only if, it can be reliably measured and it
is probable that future economic benefits associated with the item will flow to the Group.
Subsequent to recognition, property, plant and equipment are measured at cost less accumulated depreciation and
accumulated impairment losses. When significant parts of property, plant and equipment are required to be replaced
in intervals, the Group recognises such parts as individual assets with specific useful lives.
Freehold land has an unlimited useful life and is not depreciated. No depreciation is provided for 999-year leasehold
land. No depreciation is provided on capital works in progress as the assets are not yet available for use.
Depreciation of an asset begins when it is available for use and is calculated on a straight-line basis over the estimated
useful life of an asset. The useful lives are as follows:
Leasehold land Term of lease, up to 99 years
Buildings 50 years
Office furniture, fittings and equipment 5 to 10 years
Renovation 3 to 5 years
Computer equipment and software development costs 3 to 10 years
Motor vehicles 5 years
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in
circumstances indicate that the carrying values may not be recoverable.
NOTES TO THEFINANCIAL STATEMENTS
111GREAT EASTERN HOLDINGS LIMITED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.25 Property, Plant and Equipment (continued)
The residual values, useful life and depreciation method are reviewed at each financial year-end and adjusted
prospectively, if appropriate. This is to ensure that the amount, method and period of depreciation are consistent with
previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items
of property, plant and equipment.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are
expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the Profit and Loss
Statement or Revenue Statements in the year the asset is derecognised.
2.26 Investment Properties
Investment properties are properties that are owned by the Group in order to earn rentals or for capital appreciation,
or both, rather than for use in the production or supply of goods or services, or for administrative purposes, or in the
ordinary course of business. Investment properties comprise completed investment properties and properties that are
being constructed or developed for future use as investment properties.
Investment properties are initially measured at cost, including transaction costs. The carrying amount includes the cost
of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met.
Subsequent to initial recognition, investment properties are measured at fair value which reflects market conditions at
the balance sheet date. Gains or losses arising from changes in the fair values of investment properties are recognised
in the Profit and Loss Statement or Revenue Statements in the year in which they arise.
Investment properties are derecognised when either they have been disposed of or when the investment property
is permanently withdrawn from use and no future economic benefit is expected from its disposal. Gains or losses
on the retirement or disposal of an investment property are recognised in the Profit and Loss Statement or Revenue
Statements in the year of retirement or disposal.
Transfers are made to or from investment property only when there is a change in use. For a transfer from investment
property to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of
change in use. For a transfer from owner occupied property to investment property, the property is accounted for in
accordance with the accounting policy for property, plant and equipment set out in Note 2.25 up to the date of change
in use.
2.27 Provision for Agents’ Retirement Benefits
Provision for agents’ retirement benefits is set aside for agents from the Malaysian operations and is calculated in
accordance with the terms and conditions in the respective Life Assurance Sales Representative’s Agreement. The
terms and conditions of the Agreement stipulate that upon the agent maintaining his position for the qualifying year
and achieving the required personal sales and minimum new business, the agent shall be allocated a deferred benefit/
retirement benefit. The deferred benefit/retirement benefit accumulated at Balance Sheet date includes accrued
interest. The accrued deferred benefit shall only become payable provided the Agreement has been in force for
certain continuous contract years and the agent has attained the minimum retirement age stipulated in the Agreement.
NOTES TO THEFINANCIAL STATEMENTS
112 ANNUAL REPORT 2012 [ MORE TO LIFE ]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.28 Related Parties
A related party is defined as follows:
(a) A person or a close member of that person’s family is related to the Group and Company if that person:
(i) Has control or joint control over the Company;
(ii) Has significant influence over the Company; or
(iii) Is a member of the key management personnel of the Group or Company or of a parent of the Company.
(b) An entity is related to the Group and the Company if any of the following conditions applies:
(i) The entity and the Company are members of the same group (which means that each parent, subsidiary
and fellow subsidiary is related to the others);
(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member
of a group of which the other entity is a member);
(iii) Both entities are joint ventures of the same third party;
(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) The entity is a post-employment benefit plan for the benefit of the employees of either the Company or
an entity related to the Company. If the Company is itself such a plan, the sponsoring employers are also
related to the Company;
(vi) The entity is controlled or jointly controlled by a person identified in (a);
(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management
personnel of the entity (or of a parent of the entity).
In the Company’s financial statements, loans to subsidiaries are interest-free and stated at fair value at inception.
The difference between the fair value and the loan amount at inception is recognised as additional investment in
subsidiaries in the Company’s financial statements. Subsequently, these loans are measured at amortised cost using
the effective interest method. The unwinding of the difference is recognised as interest expense in the Profit and Loss
Statement over the expected repayment period.
2.29 Segment Reporting
For management purposes, the Group is organised into operating segments based on their products and services.
The management regularly reviews the segment results in order to allocate resources to the segments and to assess
the segment performance. Additional disclosures on each of these segments are shown in Note 34, including the
factors used to identify the reportable segments and the measurement basis of segment information.
2.30 Share Capital and Share Issuance Expenses
Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly
attributable to the issuance of ordinary shares are deducted against share capital.
NOTES TO THEFINANCIAL STATEMENTS
113GREAT EASTERN HOLDINGS LIMITED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.31 Contingencies
A contingent liability is:
(a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence
or non-occurrence of one or more uncertain future events not wholly within the control of the Group; or
(b) a present obligation that arises from past events but is not recognised because:
(i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the
obligation; or
(ii) the amount of the obligation cannot be measured with sufficient reliability.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by
the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group.
Contingent liabilities and assets are not recognised on the balance sheet of the Group, except for contingent liabilities
assumed in a business combination that are present obligations and for which the fair values can be reliably determined.
2.32 Critical Accounting Estimates and Judgments
In the preparation of the Group’s financial statements, management makes estimates, assumptions and judgments
that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities
at the reporting date. Estimates, assumptions and judgments are continually evaluated and based on internal studies
of actual or historical experience and other factors. Best estimates and assumptions are constantly reviewed to ensure
that they remain relevant and valid. However, uncertainty about these assumptions and estimates could result in
outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in future
periods.
2.32.1 Critical Accounting Estimates and Assumptions
(a) Liabilities of insurance business
The estimation of the ultimate liability arising from claims made under life and general insurance
contracts is the Group’s most critical accounting estimate. There are several sources of uncertainty that
need to be considered in the estimation of the liabilities that the Group will ultimately be required to pay
as claims.
For life insurance contracts, estimates are made for future deaths, disabilities, lapses, voluntary
terminations, investment returns and administration expenses. The Group relies on standard industry
reinsurance and national mortality tables which represent historical mortality experience, and makes
appropriate adjustments for its respective risk exposures in deriving the mortality and morbidity
estimates. These estimates provide the basis for the valuation of the future benefits to be paid to
policyholders and to ensure adequate provisions which are monitored against current and future
premiums. For those contracts that insure risk on longevity and disability, estimates are made based
on recent past experience and emerging trends. Epidemics and changing patterns of lifestyle could
result in significant changes to the expected future exposures. At each reporting date, these estimates
are assessed for adequacy and changes will be reflected as adjustments to insurance fund contract
liabilities. The carrying value of life insurance contract liabilities as at 31 December 2012 amounted to
$41,484.0 million (31 December 2011: $39,289.7 million).
NOTES TO THEFINANCIAL STATEMENTS
114 ANNUAL REPORT 2012 [ MORE TO LIFE ]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.32 Critical Accounting Estimates and Judgments (continued)
2.32.1 Critical Accounting Estimates and Assumptions (continued)
(a) Liabilities of insurance business (continued)
For general insurance contracts, estimates have to be made for both the expected ultimate cost of
claims reported at the balance sheet date and for the expected ultimate cost of claims incurred but not
yet reported at the balance sheet date (“IBNR”).
It can take a significant time before the ultimate claims costs can be established with certainty and for
some type of policies, IBNR claims form the majority of the balance sheet liability. The ultimate cost of
outstanding claims is estimated using a range of standard actuarial claims projection techniques such
as Chain Ladder and Bornhuetter-Ferguson methods.
The main assumption underlying these techniques is that a company’s past development experience
can be used to project future claims development and hence, ultimate claim costs. As such, these
methods extrapolate the development of paid and incurred losses, average costs per claim and claim
numbers based on the observed development of earlier years and expected loss ratios. Historical
claims development is mainly analysed by accident years but can also be further analysed by significant
business lines and claims type. Large claims are usually separately addressed, either by being reserved
at the face of loss adjustor estimates or separately projected in order to reflect their future development.
In most cases, no explicit assumptions are made regarding future rates of claims inflation or loss ratios.
Additional qualitative judgment is used to assess the extent to which past trends may not apply in future,
(for example, to reflect one-off occurrences, changes in external or market factors, economic conditions
as well as internal factors such as portfolio mix, policy features and claims handling procedures) in
order to arrive at the estimated ultimate cost of claims that present the likely outcome from the range of
possible outcomes, taking account of all uncertainties involved. The carrying value of general insurance
contract liabilities as at 31 December 2012 amounted to $115.9 million (31 December 2011: $116.1
million).
(b) Share option costs
The Group calculates the fair value of share options using the binomial model which requires input of
certain variables which are determined based on assumptions made. Further details are provided in
Note 31.
(c) Income taxes
The Group is subject to income taxes in numerous jurisdictions. Significant judgment is required in
determining the capital allowances and deductibility of certain expenses during the estimation of the
provision for income taxes. There are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. The Group recognises liabilities for
anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax
outcome of these matters is different from the amounts that were initially recorded, such differences will
impact the income tax and deferred tax provisions in the period in which the determination is made.
The carrying amount of the income tax and deferred tax provisions as at 31 December 2012 amounted
to $1,557.7 million (31 December 2011: $1,363.8 million).
NOTES TO THEFINANCIAL STATEMENTS
115GREAT EASTERN HOLDINGS LIMITED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.32 Critical Accounting Estimates and Judgments (continued)
2.32.1 Critical Accounting Estimates and Assumptions (continued)
Provision for agents’ retirement benefits is calculated in accordance with the terms and conditions
of the agreement, which stipulate that upon the agent maintaining his position for the qualifying year
and achieving the required personal sales and minimum new business, the Group shall allocate to the
agent a deferred benefit/retirement benefit. Interest is accrued based on an estimated rate at the end
of the financial year on the accumulated deferred benefit/retirement benefit with an adjustment made
subsequent to year end for changes in certain statutory dividend rates. Additional provision is made to
cover estimated liability for future benefits payable in the event of death, disability, investment returns
and benefits payable. The agents’ retirement benefit becomes vested and payable upon fulfillment of
the stipulated conditions.
Judgment is required to estimate the provision to be made, based upon the likely fulfillment of the
conditions and occurrence of the claimable event. At each reporting year, these estimates are reassessed
for adequacy and changes will be reflected as adjustments to the provision. The carrying amount of
agents’ retirement benefits as at 31 December 2012 amounted to $245.2 million (31 December 2011:
$231.3 million).
2.32.2 Critical Judgments in Applying Accounting Policies
(a) Impairment of goodwill
The Group conducts impairment tests on the carrying value of goodwill in accordance with the accounting
policy stated in Note 2.23. The recoverable amounts of cash-generating units are determined based
on the value-in-use method, which adopts a discounted cash flow approach on projections, budgets
and forecasts over a 5-year period. Cash flows beyond the fifth year are extrapolated using estimated
terminal growth rates not exceeding the long-term average growth of the industry and country in
which the cash-generating unit operates. The discount rates applied to the cash flow projections are
derived from the Group’s weighted average cost of capital at the date of assessment. Changes to the
assumptions, particularly the discount rate and terminal growth rate, may significantly affect the results
of the impairment test. Further details of the key assumptions applied in the impairment assessment of
goodwill are provided in Note 28.
(b) Impairment of loans and receivables
The Group determines impairment of loans by calculating the present value of future recoverable cash
flows and the fair value of the underlying collaterals for impaired loans against the carrying value of the
loans. The future recoverable cash flows are determined based on credit assessment on a loan-by-loan
basis for impaired loans.
NOTES TO THEFINANCIAL STATEMENTS
116 ANNUAL REPORT 2012 [ MORE TO LIFE ]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.32 Critical Accounting Estimates and Judgments (continued)
2.32.2 Critical Judgments in Applying Accounting Policies (continued)
The Group reviews its debt securities classified as available-for-sale investments at each balance sheet
date to assess whether they are impaired. The Group also records impairment charges on available-
for-sale equity investments when there has been a significant or prolonged decline in the fair value
below their cost. The determination of what is “significant” or “prolonged” requires judgment. In making
this judgment, the Group evaluates, among other factors, historical share price movements and the
duration and extent to which the fair value of an investment is less than its cost.
Contracts are classified as insurance contracts where they transfer significant insurance risk from the
policyholder to the Group. The Group exercises judgment about the level of insurance risk transferred.
The level of insurance risk is assessed by considering whether the Group is required to pay significant
additional benefits in excess of amounts payable when the insured event occurs. These additional
benefits include claims liability and assessment costs, but exclude the loss of the ability to charge the
policyholder for future services. The assessment covers the whole of the expected term of the contract
where such additional benefits could be payable. Some contracts contain options for the policyholder
to purchase insurance risk protection at a later date; these insurance risks are deemed not significant.
The Group adopts certain criteria based on FRS 40, Investment Property in determining whether a
property qualifies to be classified as an investment property. Investment property is a property held to
earn rentals or for capital appreciation or both.
Some properties comprise a portion that is held to earn rentals or for capital appreciation and another
portion that is held for use in the production or supply of goods or services or for administrative
purposes.
If these portions could be sold separately (or leased separately under a finance lease), the Group would
account for these portions separately. If the portions could not be sold separately, the property is an
investment property only if an insignificant portion is held for use in the production or supply of goods or
services or for administrative purposes. Judgment is made on an individual property basis to determine
whether ancillary services are so significant that a property does not qualify as investment property.
NOTES TO THEFINANCIAL STATEMENTS
117GREAT EASTERN HOLDINGS LIMITED
3 SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES
Country of
Incorporation Principal Activities
Effective interest
held by GEH
2012 2011
% %
(i) SIGNIFICANT SUBSIDIARIES
Held by the Company
The Great Eastern Life Assurance Company
Limited(3.1)
Singapore Life assurance 100.0 100.0
The Overseas Assurance Corporation Limited(3.1) Singapore Composite insurance 100.0 100.0
Lion Global Investors Limited(3.1) Singapore Asset management 70.0 70.0
The Great Eastern Trust Private Limited(3.1) Singapore Investment holding 100.0 100.0
Held through subsidiaries
Great Eastern Life Assurance (Malaysia) Berhad(3.2) Malaysia Life assurance 100.0 100.0
Overseas Assurance Corporation (Malaysia)
Berhad(3.2)
Malaysia General insurance 100.0 100.0
P.T. Great Eastern Life Indonesia(3.2) Indonesia Life assurance 99.2 99.2
Straits Eastern Square Private Limited(3.1) Singapore Property development
and investment
100.0 100.0
Great Eastern Life (Vietnam) Company Limited(3.2) Vietnam Life assurance 100.0 100.0
218 Orchard Private Limited(3.1) Singapore Property development
and investment
100.0 100.0
Great Eastern Takaful Sdn Bhd(3.2) Malaysia Family Takaful
business
70.0 70.0
(ii) SIGNIFICANT ASSOCIATES
Held through subsidiaries
Fairfield Investment Fund Ltd(3.3) British Virgin
Islands
Collective investment
scheme
45.8 45.8
Ascendas China Commercial Fund(3.3) Singapore Real Estate
Investment Trust
28.5 28.5
Lion Indian Real Estate Fund(3.3) Cayman
Islands
Real Estate
Investment Trust
45.5 45.5
LionGlobal Target Return Fund(3.3) & (3.4) Singapore Unit Trust - 50.0
(iii) SIGNIFICANT JOINT VENTURES
Held through subsidiaries
Great Eastern Life Assurance (China) Company
Limited(3.3)
People’s
Republic of
China
Life assurance 50.0 50.0
(3.1)
(3.2)
(3.3) Audited by PricewaterhouseCoopers.(3.4) During the year, the Group disposed of its interests in the fund and ceased to account for it as an associated company.
NOTES TO THEFINANCIAL STATEMENTS
118 ANNUAL REPORT 2012 [ MORE TO LIFE ]
4 INVESTMENT INCOME, NET
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011 2012 2011
4.1 Profit and Loss Statements
Dividend income
- Investments
Available-for-sale financial assets 39.5 32.6 39.5 32.6 - - - -
39.5 32.6 39.5 32.6 - - - -
Interest income
- Investments
Available-for-sale financial assets 65.3 56.0 65.3 56.0 - - - -
Financial assets at fair value
through profit and loss
statements 2.5 1.3 2.5 1.3 - - - -
- Loans and receivables 5.4 7.3 5.4 7.3 - - - -
73.2 64.6 73.2 64.6 - - - -
112.7 97.2 112.7 97.2 - - - -
Investment related expenses (1.3) (0.8) (1.3) (0.8) - - - -
111.4 96.4 111.4 96.4 - - - -
4.2 Life Assurance Revenue
Statement
Dividend income
- Investments
Available-for-sale financial assets 328.1 325.9 - - 328.1 325.9 - -
Financial assets at fair value
through profit and loss
statements 83.8 83.7 - - 83.8 83.7 - -
411.9 409.6 - - 411.9 409.6 - -
Interest income
- Investments
Available-for-sale financial assets 1,047.6 1,022.0 - - 1,047.6 1,022.0 - -
Financial assets at fair value
through profit and loss
statements 131.4 108.4 - - 131.4 108.4 - -
- Loans and receivables 221.5 225.7 - - 221.5 225.7 - -
1,400.5 1,356.1 - - 1,400.5 1,356.1 - -
1,812.4 1,765.7 - - 1,812.4 1,765.7 - -
Investment related expenses (94.2) (89.8) - - (94.2) (89.8) - -
1,718.2 1,675.9 - - 1,718.2 1,675.9 - -
NOTES TO THEFINANCIAL STATEMENTS
119GREAT EASTERN HOLDINGS LIMITED
4 INVESTMENT INCOME, NET (continued)
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011 2012 2011
4.3 General Insurance Revenue
Statement
Dividend income
- Investments
Available-for-sale financial assets 0.4 0.6 0.4 0.6 - - - -
0.4 0.6 0.4 0.6 - - - -
Interest income
- Investments
Available-for-sale financial assets 12.3 9.1 12.3 9.1 - - - -
Financial assets at fair value
through profit and loss
statements 0.1 - 0.1 - - - - -
- Loans and receivables 0.4 0.8 0.4 0.8 - - - -
12.8 9.9 12.8 9.9 - - - -
13.2 10.5 13.2 10.5 - - - -
Investment related expenses (0.3) (0.3) (0.3) (0.3) - - - -
12.9 10.2 12.9 10.2 - - - -
During the year ended 31 December 2012, the total dividend and interest income for financial assets that are not
classified at fair value through profit and loss amounted to $110.2 million, $1,597.2 million and $13.1 million for the
Profit and Loss Statement, Life Assurance Revenue Statement and General Insurance Revenue Statement respectively
(2011: $95.9 million, $1,573.6 million and $10.5 million).
5 GAIN/(LOSS) ON SALE OF INVESTMENTS AND CHANGES IN FAIR VALUE
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011 2012 2011
5.1 Profit and Loss Statements
Realised gain from sale of
investments 0.9 18.8 0.9 18.8 - - - -
Amount transferred from
Statement of Comprehensive
Income on sale of investments 493.7 22.8 493.7 22.8 - - - -
Changes in fair value of held-for-
trading investments 68.3 (51.5) 68.3 (51.5) - - - -
562.9 (9.9) 562.9 (9.9) - - - -
NOTES TO THEFINANCIAL STATEMENTS
120 ANNUAL REPORT 2012 [ MORE TO LIFE ]
5 GAIN/(LOSS) ON SALE OF INVESTMENTS AND CHANGES IN FAIR VALUE (continued)
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011 2012 2011
5.2 Life Assurance Revenue
Statement
Realised gain from sale of
investments 87.4 19.7 - - 87.4 19.7 - -
Amount transferred from Fair Value
Reserve on sale of investments 18 1,817.9 196.2 - - 1,817.9 196.2 - -
Changes in fair value of
investments
- fair value through revenue
statement 300.7 (257.6) - - 300.7 (257.6) - -
- held-for-trading 186.0 (185.1) - - 186.0 (185.1) - -
486.7 (442.7) - - 486.7 (442.7) - -
Changes in fair value of investment
properties 29 129.5 52.4 - - 129.5 52.4 - -
2,521.5 (174.4) - - 2,521.5 (174.4) - -
5.3 General Insurance Revenue
Statement
Realised gain/(loss) from sale of
investments 3.3 (4.5) 3.3 (4.5) - - - -
Amount transferred from Fair Value
Reserve on sale of investments 17 1.4 6.4 1.4 6.4 - - - -
Changes in fair value of held-for-
trading investments (0.2) (0.4) (0.2) (0.4) - - - -
Changes in fair value of investment
properties 29 - 0.3 - 0.3 - - -
4.5 1.8 4.5 1.8 - - - -
6 PROVISIONS
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011 2012 2011
6.1 Provision for impairment of
secured loans
Balance at the beginning and end
of the year 22 2.1 2.1 2.1 2.1 - - - -
NOTES TO THEFINANCIAL STATEMENTS
121GREAT EASTERN HOLDINGS LIMITED
6 PROVISIONS (continued)
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011 2012 2011
6.2 Provision for impairment of
quoted equity securities
Balance at the beginning of the
year 64.4 65.4 1.4 0.3 63.0 65.1 - -
Increase in provision for the year 9.0 27.3 0.2 1.3 8.8 26.0 - -
Utilised during the year (19.5) (28.3) - (0.2) (19.5) (28.1) - -
Balance at the end of the year 24 53.9 64.4 1.6 1.4 52.3 63.0 - -
6.3 Provision for impairment of
unquoted equity securities
Balance at the beginning of the
year 34.2 30.7 - - 34.2 30.7 - -
Increase in provision for the year 0.4 4.0 - - 0.4 4.0 - -
Utilised during the year (0.3) (0.5) - - (0.3) (0.5) - -
Balance at the end of the year 24 34.3 34.2 - - 34.3 34.2 - -
6.4 Provision for impairment of
quoted debt securities
Balance at the beginning and end
of the year 24 0.2 0.2 - - 0.2 0.2 - -
6.5 Provision for impairment of
unquoted debt securities
Balance at the beginning of the
year 2.8 22.9 2.8 6.1 - 16.8 - -
(Decrease)/increase in provision for
the year - (16.6) - 0.3 - (16.9) - -
Utilised during the year - (3.5) - (3.6) - 0.1 - -
Balance at the end of the year 24 2.8 2.8 2.8 2.8 - - - -
6.6 Provision for impairment
of collective investment
schemes
Balance at the beginning of the
year 4.3 2.7 1.2 0.9 3.1 1.8 - -
Increase in provision for the year 0.4 2.9 - 0.3 0.4 2.6 - -
Utilised during the year (1.5) (1.3) (0.2) - (1.3) (1.3) - -
Balance at the end of the year 24 3.2 4.3 1.0 1.2 2.2 3.1 - -
NOTES TO THEFINANCIAL STATEMENTS
122 ANNUAL REPORT 2012 [ MORE TO LIFE ]
6 PROVISIONS (continued)
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011 2012 2011
6.7 Provision for impairment of
unsecured loan to subsidiary
companies
Balance at the beginning of the
year - - - - - - 7.0 5.4
Increase in provision for the year - - - - - - - 1.6
Balance at the end of the year 21 - - - - - - 7.0 7.0
6.8 Provision for impairment
of property, plant and
equipment
Balance at the beginning and end
of the year 93.5 93.5 0.3 0.3 93.2 93.2 - -
Increase in provision for
impairment of assets for the
year 9.8 17.6 0.2 1.9 9.6 15.7 - 1.6
7 PROVISION FOR AGENTS’ RETIREMENT BENEFITS
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011 2012 2011
Balance at the beginning of the year 231.3 216.2 - - 231.3 216.2 - -
Currency translation reserve adjustment (5.9) (4.2) - - (5.9) (4.2) - -
Increase in provision for the year 34.4 31.2 - - 34.4 31.2 - -
Paid during the year (14.6) (11.9) - - (14.6) (11.9) - -
Balance at the end of the year 245.2 231.3 - - 245.2 231.3 - -
As at 31 December 2012, $63.8 million (2011: $59.9 million) of the above provision for agents’ retirement benefits is payable
within one year.
NOTES TO THEFINANCIAL STATEMENTS
123GREAT EASTERN HOLDINGS LIMITED
8 ADDITIONAL PROFIT & LOSS DISCLOSURES
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011 2012 2011
Fees paid to auditors 1.7 1.7 0.8 0.9 0.9 0.8 0.2 0.4
Audit fees paid to Auditors of the
Company 0.7 0.8 0.4 0.4 0.3 0.4 0.2 0.2
Audit fees paid to other auditors 0.7 0.6 0.2 0.2 0.5 0.4 - -
Non-audit fees paid to Auditors of
the Company 0.2 0.3 0.1 0.3 0.1 - - 0.2
Non-audit fees paid to other
auditors 0.1 - 0.1 - - - - -
Staff costs and related expenses
(including executive directors
and key management personnel
compensation) 246.1 235.8 87.7 84.6 158.4 151.2 1.4 0.8
Salaries, wages, bonuses and other
costs 220.7 211.6 79.9 77.7 140.8 133.9 1.3 0.8
Central Provident Fund / Employee
Provident Fund 23.0 20.7 6.3 5.1 16.7 15.6 0.1 -
Share-based payments 2.4 3.5 1.5 1.8 0.9 1.7 - -
Rental expense 22.0 20.4 7.8 7.0 14.2 13.4 0.3 0.3
Fee income 62.1 64.0 62.1 64.0 - - - -
Fund management fee 61.8 63.8 61.8 63.8 - - - -
Financial advisory fee 0.3 0.2 0.3 0.2 - - - -
(Gain)/loss on disposal of property,
plant and equipment, assets held for
sale and investment properties (1.1) (0.6) (0.4) 0.1 (0.7) (0.7) - -
Assets held for sale (0.4) 0.1 (0.4) 0.1 - - - -
Investment properties (0.7) (0.7) - - (0.7) (0.7) - -
Depreciation 49.9 47.7 3.2 2.6 46.7 45.1 0.1 0.1
Interest expense on policy benefits 100.5 90.4 - - 100.5 90.4 - -
NOTES TO THEFINANCIAL STATEMENTS
124 ANNUAL REPORT 2012 [ MORE TO LIFE ]
9 INCOME TAX
Major components of income tax expense
The major components of income tax expense for the periods ended 31 December 2012 and 2011 are:
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011 2012 2011
Profit and Loss or Revenue
Statements:
Current income tax:
- Current income taxation 454.5 241.4 192.3 89.0 262.2 152.4 - -
- Over provision in respect of
previous years (89.7) (6.6) (8.5) (3.5) (81.2) (3.1) - -
364.8 234.8 183.8 85.5 181.0 149.3 - -
Deferred income tax:
- Origination and reversal of
temporary differences 125.2 (1.7) (2.0) (1.6) 127.2 (0.1) - -
125.2 (1.7) (2.0) (1.6) 127.2 (0.1) - -
Total tax charge for the year
recognised in Profit and Loss
or Revenue Statements 490.0 233.1 181.8 83.9 308.2 149.2 - -
Deferred tax for the year, on fair value changes on available-for-sale investments, charged directly to other
comprehensive income and to the Insurance Funds:
- equity 22.3 15.9 22.3 15.9 - - - -
- insurance funds 17, 18 (29.3) (20.9) (0.3) (0.4) (29.0) (20.5) - -
NOTES TO THEFINANCIAL STATEMENTS
125GREAT EASTERN HOLDINGS LIMITED
9 INCOME TAX (continued)
The reconciliation between income tax expense and the product of accounting profit multiplied by the applicable corporate
tax rate for the years ended 31 December 2012 and 2011 is as follows:
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011 2012 2011
Profit before income tax 1,372.4 473.5 1,372.4 473.5 - - 505.7 300.1
General insurance profit before
income tax 42.3 39.9 42.3 39.9 - - - -
Life assurance profit before income
tax 1,492.3 615.6 - - 1,492.3 615.6 - -
Tax at the domestic rates applicable
to profits in the countries where
the Group operates 409.0 169.2 265.8 111.0 143.2 58.2 86.0 51.0
Adjustments:
Tax effect of net surplus transferred
to Shareholders’ Fund (69.5) (22.4) (69.5) (22.4) - - - -
Tax effect of provision against future
policyholders’ bonus 130.1 0.5 - - 130.1 0.5 - -
Foreign tax paid not recoverable 17.0 15.8 2.1 1.6 14.9 14.2 - -
Permanent differences 318.1 293.0 8.2 12.1 309.9 280.9 1.7 1.4
Tax exempt income (230.0) (223.3) (18.4) (17.7) (211.6) (205.6) (87.7) (52.4)
Deferred tax assets not recognised 5.0 7.0 2.1 2.7 2.9 4.3 - -
Over provision in respect of previous
years (89.7) (6.6) (8.5) (3.5) (81.2) (3.1) - -
Others - (0.1) - 0.1 - (0.2) - -
Income tax expense recognised
in the Profit and Loss or
Revenue Statements 490.0 233.1 181.8 83.9 308.2 149.2 - -
The above reconciliation is prepared by aggregating separate reconciliations for each national jurisdiction.
Deferred Tax
Balance at the beginning of the year 945.9 949.8 87.8 105.9 858.1 843.9 - -
Currency translation reserve
adjustments (8.2) (7.2) (1.3) (1.0) (6.9) (6.2) - -
Deferred tax charge taken to Profit
and Loss or Revenue Statements:
Other temporary differences (7.8) (3.2) (2.0) (1.6) (5.8) (1.6) - -
Fair value changes 2.9 1.0 - - 2.9 1.0 - -
Provision against future
policyholders’ bonus 130.1 0.5 - - 130.1 0.5 - -
Deferred tax on fair value changes on
available-for-sale investments 7.0 5.0 (22.0) (15.5) 29.0 20.5 - -
Balance at the end of the year 1,069.9 945.9 62.5 87.8 1,007.4 858.1 - -
NOTES TO THEFINANCIAL STATEMENTS
126 ANNUAL REPORT 2012 [ MORE TO LIFE ]
9 INCOME TAX (continued)
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011 2012 2011
Deferred taxes at 31 December
related to the following:
Balance Sheets
Deferred tax liabilities:
Differences in depreciation for
tax purposes 7.6 8.9 0.7 0.3 6.9 8.6 - -
Accrued investment income 1.0 0.6 0.1 0.1 0.9 0.5 - -
Net unrealised gains on investments 277.6 269.1 15.4 37.9 262.2 231.2 - -
Net accretion on fixed income
investments 11.0 19.4 0.1 0.7 10.9 18.7 - -
Undistributed bonus to policyholders 735.4 607.2 - - 735.4 607.2 - -
Differences in insurance items 50.6 51.8 50.6 51.8 - - - -
Deferred tax liabilities 1,083.2 957.0 66.9 90.8 1,016.3 866.2 - -
Deferred tax assets:
Net unrealised loss on investments 0.1 - 0.1 - - - - -
Unutilised tax losses carried forward - 1.9 - - - 1.9 - -
Net amortisation on fixed income
investments 9.8 9.2 3.3 3.0 6.5 6.2 - -
Other accruals and provisions 3.4 - 1.0 - 2.4 - - -
Deferred tax assets 13.3 11.1 4.4 3.0 8.9 8.1 - -
Net deferred tax liabilities 1,069.9 945.9 62.5 87.8 1,007.4 858.1 - -
Profit and Loss Statements and Revenue Statements
Deferred tax liabilities:
Differences in depreciation for
tax purposes (1.3) (1.2) 0.4 - (1.7) (1.2) - -
Accrued investment income 0.4 - - - 0.4 - - -
Net unrealised gains on investments 7.0 (4.1) - (7.6) 7.0 3.5 - -
Net accretion on fixed income
investments - 2.0 - 0.1 - 1.9 - -
Undistributed bonus to policyholders 18 130.1 0.5 - - 130.1 0.5 - -
Deferred tax assets:
Net unrealised loss on investments (0.5) 4.0 (0.5) 6.8 - (2.8) - -
Unutilised tax losses carried forward 1.9 (1.6) - - 1.9 (1.6) - -
Net amortisation on fixed income
investments (9.0) (1.5) (0.9) (1.1) (8.1) (0.4) - -
Other accruals and provisions (3.4) 0.2 (1.0) 0.2 (2.4) - - -
Deferred tax expense/(benefit) 125.2 (1.7) (2.0) (1.6) 127.2 (0.1) - -
Unrecognised tax losses
At the balance sheet date, the Group has tax losses of approximately $20.9 million (2011: $15.9 million) that are available for
offset against future taxable profits of the companies in which the losses arose, for which no deferred tax asset is recognised
due to uncertainty of its recoverability. The use of these tax losses is subject to the agreement of the tax authorities and
compliance with certain provisions of the tax legislation of the respective countries in which the companies operate.
There are no unrecognised temporary differences relating to investments in subsidiaries and joint ventures.
NOTES TO THEFINANCIAL STATEMENTS
127GREAT EASTERN HOLDINGS LIMITED
10 EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the year.
Diluted and basic earnings per share are the same as there are no dilutive potential ordinary shares.
The following reflects the profit for the year attributable to ordinary shareholders and the weighted average number of
shares outstanding during the year, used in the computation of basic and diluted earnings per share for the years ended 31
December:
Group
2012 2011
Profit attributable to ordinary shareholders for computation
of basic and diluted earnings per share (in millions of Singapore Dollars) 1,189.1 385.7
Weighted average number of ordinary shares on issue
applicable to basic and diluted earnings per share (in millions) 473.3 473.3
Basic and diluted earnings per share (in Singapore Dollars) $2.51 $0.81
There have been no transactions involving ordinary shares or potential ordinary shares since the reporting date and before
the completion of these financial statements.
11 SHARE CAPITAL
Group and Company
2012 2011
Number
of shares
Amount
$’mil
Number
of shares
Amount
$’mil
Ordinary shares: Issued and fully paid
Balance at the beginning of the year 473,319,069 152.7 473,319,069 247.4
Capitalisation from accumulated profit - - - 269.8
Cash distribution of 77 cents per ordinary share - - - (364.5)
Balance at the end of the year 473,319,069 152.7 473,319,069 152.7
The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares
carry one vote per share without restriction.
In accordance with the Companies Act Cap. 50, the shares of the Company have no par value.
On 13 June 2011, the Company undertook a capital reduction and cash distribution exercise pursuant to the Shareholders’
approval in an extraordinary general meeting held on 14 April 2011. $269.8 million was capitalised from the accumulated
profit of the Company and applied in paying up in full 473,319,069 new ordinary shares of the Company. The new shares
arising from the capitalisation were cancelled immediately upon their issue and allotment. The enlarged share capital was
immediately reduced by a cash distribution of $364.5 million at $0.77 per ordinary share to the Shareholders of the Company.
The capital reduction and cash distribution exercise did not result in a change in the number of Shares.
NOTES TO THEFINANCIAL STATEMENTS
128 ANNUAL REPORT 2012 [ MORE TO LIFE ]
12 RESERVES
Merger reserve represents the difference between the fair value and nominal value of shares issued for the acquisition of a
subsidiary. The merger reserve had been utilised in part in prior years to write-off the goodwill on acquisition of the subsidiary.
The currency translation reserve represents exchange differences arising from the translation of the financial statements of
foreign operations whose functional currencies are different from that of the Group’s presentation currency. The currency
translation reserve is also used to record the effect of hedging of net investment in foreign operations.
The fair value reserve represents the cumulative fair value changes, net of tax, of available-for-sale investments until they are
disposed of or impaired.
As at 31 December 2012, non-distributable reserves of $1,018.2 million (2011: $1,122.7 million) have been set aside by the
Group’s insurance entities to meet risk-based capital requirements for regulatory reporting purposes. These reserves are
deemed statutory reserves and are not available for distribution to shareholders. These statutory reserves are measured
according to the regulatory prescriptions and are subject to changes in line with the underlying risks underwritten by the
respective businesses. Refer to Note 35 for more details.
13 INSURANCE PAYABLES
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011 2012 2011
Claims admitted or intimated 206.9 190.3 - - 206.9 190.3 - -
Policy benefits 2,512.5 2,262.0 - - 2,512.5 2,262.0 - -
Reinsurance liabilities 71.8 65.2 24.3 24.1 47.5 41.1 - -
2,791.2 2,517.5 24.3 24.1 2,766.9 2,493.4 - -
Policy benefits bear interest at 3% per annum (2011: 3% per annum) for the Group’s insurance subsidiaries in Singapore and
at 5% per annum (2011: 5% per annum) for the Group’s insurance subsidiaries in Malaysia.
NOTES TO THEFINANCIAL STATEMENTS
129GREAT EASTERN HOLDINGS LIMITED
14 OTHER CREDITORS AND INTERFUND BALANCES
Other creditors and interfund balances comprise the following:
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011 2012 2011
Financial Liabilities:
Accrued expenses and other
creditors 496.4 447.4 93.0 88.5 403.4 358.9 6.4 6.1
Investment creditors 475.9 728.5 10.7 109.3 465.2 619.2 - -
Interest payable 9.2 9.2 9.2 9.2 - - - -
Amount due to holding company(1) 2.6 2.2 2.6 2.2 - - - -
Interfund balances 1,304.1 1,071.6 - 97.0 1,304.1 974.6 - -
2,288.2 2,258.9 115.5 306.2 2,172.7 1,952.7 6.4 6.1
Non Financial Liabilities:
Premiums in suspense(2) 173.3 106.0 0.4 0.4 172.9 105.6 - -
2,461.5 2,364.9 115.9 306.6 2,345.6 2,058.3 6.4 6.1
(1)
(2) Amounts will be recognised within one year.
15 DEBT ISSUED
Group
in Singapore Dollars (millions) Issue Date Maturity Date 2012 2011
Issued by The Great Eastern Life Assurance Company
Limited (“GELS”):
$400.0 million 4.6% subordinated fixed rate notes 19 Jan 2011 19 Jan 2026 399.2 399.1
399.2 399.1
On 19 January 2011, one of the Group’s subsidiaries issued $400.0 million subordinated fixed rate notes (“Notes”) due 2026
callable in 2021. The Notes will initially bear interest at the rate of 4.6% per annum, payable semi-annually on 19 January
and 19 July each year up to 19 January 2021. If the Notes are not redeemed or purchased and cancelled on 19 January
2021, the interest rate from that date will be reset at a fixed rate per annum equal to the aggregate of the then prevailing
5-year SGD Swap Offer Rate and 1.35%, payable semi-annually in arrears. The subordinated notes qualify as Tier 2 capital
for the Group.
NOTES TO THEFINANCIAL STATEMENTS
130 ANNUAL REPORT 2012 [ MORE TO LIFE ]
16 UNEXPIRED RISK RESERVE
Group
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011
Balance at the beginning of the year 74.2 61.1 74.2 61.1 - -
Currency translation reserve adjustment (1.1) (0.7) (1.1) (0.7) - -
Acquisition of a business 28 - 8.1 - 8.1 - -
Increase in unexpired risk reserve during the year, gross 13.4 8.2 13.4 8.2 - -
Movement in reinsurers’ share of unexpired risk reserve
during the year (5.7) (2.5) (5.7) (2.5) - -
Balance at the end of the year 80.8 74.2 80.8 74.2 - -
Unexpired risk reserve, gross 120.3 111.8 120.3 111.8 - -
Reinsurers’ share of unexpired risk reserve 20 (39.5) (37.6) (39.5) (37.6) - -
Unexpired risk reserve, net 80.8 74.2 80.8 74.2 - -
17 GENERAL INSURANCE FUND
Group
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011
Balance at the beginning of the year 121.9 71.0 121.9 71.0 - -
Currency translation reserve adjustment (2.2) (0.7) (2.2) (0.7) - -
Acquisition of a business 28 - 58.8 - 58.8
Fair value reserve movement 1.4 1.6 1.4 1.6 - -
Decrease in loss reserve during the year, gross (1.0) (5.8) (1.0) (5.8) - -
Movement in reinsurers’ share of loss reserve
during the year 2.9 (3.0) 2.9 (3.0) - -
Balance at the end of the year 123.0 121.9 123.0 121.9 - -
General Insurance Fund comprises:
General Insurance Fund Contract Liabilities, net 115.9 116.1 115.9 116.1 - -
Reinsurers’ share of loss reserve 20 63.5 66.8 63.5 66.8 - -
General Insurance Fund Contract Liabilities, gross 179.4 182.9 179.4 182.9 - -
Fair Value Reserve 7.1 5.8 7.1 5.8 - -
186.5 188.7 186.5 188.7 - -
NOTES TO THEFINANCIAL STATEMENTS
131GREAT EASTERN HOLDINGS LIMITED
17 GENERAL INSURANCE FUND (continued)
Group
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011
General Insurance Fund Contract Liabilities
Balance at the beginning of the year 116.1 66.7 116.1 66.7 - -
Currency translation reserve adjustment (2.1) (0.6) (2.1) (0.6) - -
Acquisition of a business 28 - 58.8 - 58.8 - -
Decrease in loss reserve during the year, gross (1.0) (5.8) (1.0) (5.8) - -
Movement in reinsurers’ share of loss reserve
during the year 2.9 (3.0) 2.9 (3.0) - -
Balance at the end of the year 115.9 116.1 115.9 116.1 - -
Fair Value Reserve (1)
Balance at the beginning of the year 5.8 4.3 5.8 4.3 - -
Currency translation reserve adjustment (0.1) (0.1) (0.1) (0.1) - -
Fair value changes on remeasuring available-for-sale
investments 3.1 8.4 3.1 8.4 - -
Transfer of fair value reserve to General Insurance Revenue
Statement on sale of investments 5 (1.4) (6.4) (1.4) (6.4) - -
Deferred tax on fair value changes 9 (0.3) (0.4) (0.3) (0.4) - -
Balance at the end of the year 7.1 5.8 7.1 5.8 - -
(1)
NOTES TO THEFINANCIAL STATEMENTS
132 ANNUAL REPORT 2012 [ MORE TO LIFE ]
18 LIFE ASSURANCE FUND
Group
in Singapore Dollars (millions)
Total
Shareholders’ and
General Insurance
Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011
Balance at the beginning of the year 44,420.8 43,267.9 - - 44,420.8 43,267.9
Currency translation reserve adjustment (498.4) (335.9) - - (498.4) (335.9)
Fair value reserve movement 69.6 (208.6) - - 69.6 (208.6)
Change in life assurance fund contract liabilities - -
- Due to assumptions change (414.6) (85.4) - - (414.6) (85.4)
- Due to change in discount rate 588.2 252.0 - - 588.2 252.0
- Due to movement during the year 2,530.0 1,447.4 - - 2,530.0 1,447.4
Provision for deferred tax on future
policyholders’ bonus 9 (130.1) (0.5) - - (130.1) (0.5)
Transferred from Life Assurance Revenue Statement 1,184.1 466.4 - - 1,184.1 466.4
Transferred to Profit and Loss Statement (691.7) (382.5) - - (691.7) (382.5)
Balance at the end of the year 47,057.9 44,420.8 - - 47,057.9 44,420.8
During the year, as stipulated under regulations, the liabilities of the Singapore insurance funds were valued on a longer risk-
free yield curve as the longer tenor rates became available. This resulted in a gain of $44.2 million. Furthermore, to better
reflect the value of the liabilities of the Singapore insurance funds, the Group adjusted the computation of the Long Term
Risk Free Discount Rate in the manner prescribed by impending regulatory changes. This resulted in a loss of $35.7 million.
The two changes resulted in a net gain of $8.5 million.
Life Assurance Fund Contract Liabilities
Balance at the beginning of the year 39,289.7 37,933.8 - - 39,289.7 37,933.8
Currency translation reserve adjustment (379.2) (257.6) - - (379.2) (257.6)
Change in life assurance fund contract liabilities
- Due to assumptions change (414.6) (85.4) - - (414.6) (85.4)
- Due to change in discount rate 588.2 252.0 - - 588.2 252.0
- Due to movement during the year 2,530.0 1,447.4 - - 2,530.0 1,447.4
Provision for deferred tax on future
policyholders’ bonus 9 (130.1) (0.5) - - (130.1) (0.5)
Balance at the end of the year 41,484.0 39,289.7 - - 41,484.0 39,289.7
Life assurance fund contract liabilities at 31 December comprised the following:
Contracts with Discretionary Participating Features
(“DPF”) 32,990.8 31,476.5 - - 32,990.8 31,476.5
Contracts without Discretionary Participating Features
(“DPF”) 3,978.2 3,731.0 - - 3,978.2 3,731.0
Investment-linked contracts 4,515.0 4,082.2 - - 4,515.0 4,082.2
41,484.0 39,289.7 - - 41,484.0 39,289.7
NOTES TO THEFINANCIAL STATEMENTS
133GREAT EASTERN HOLDINGS LIMITED
18 LIFE ASSURANCE FUND (continued)
Group
in Singapore Dollars (millions)
Total
Shareholders’ and
General Insurance
Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011
Unallocated Surplus
Balance at the beginning of the year 2,097.1 2,052.0 - - 2,097.1 2,052.0
Currency translation reserve adjustment (67.6) (38.8) - - (67.6) (38.8)
Transferred from Life Assurance Revenue Statement 1,184.1 466.4 - - 1,184.1 466.4
Transferred to Profit and Loss Statement (691.7) (382.5) - - (691.7) (382.5)
Balance at the end of the year 2,521.9 2,097.1 - - 2,521.9 2,097.1
Fair Value Reserve (1)
Balance at the beginning of the year 3,034.0 3,282.1 - - 3,034.0 3,282.1
Currency translation reserve adjustment (51.6) (39.5) - - (51.6) (39.5)
Fair value changes on remeasuring available-for-sale
investments 1,916.5 8.1 - - 1,916.5 8.1
Transfer of fair value reserve to Life Assurance
Revenue Statement on sale of investments 5 (1,817.9) (196.2) - - (1,817.9) (196.2)
Deferred tax on fair value changes 9 (29.0) (20.5) - - (29.0) (20.5)
Balance at the end of the year 3,052.0 3,034.0 - - 3,052.0 3,034.0
(1)
19 OTHER DEBTORS AND INTERFUND BALANCES
Other debtors and interfund balances comprise the following:
Group
in Singapore Dollars (millions)
Total
Shareholders’ and
General Insurance
Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011
Financial Assets:
Accrued interest receivable 392.0 313.3 25.7 18.8 366.3 294.5
Investment debtors 115.1 49.0 17.5 14.6 97.6 34.4
Other receivables 32.8 29.7 7.3 29.6 25.5 0.1
Deposits collected 4.6 4.3 1.2 1.0 3.4 3.3
Interfund balances 1,304.3 1,071.6 1,304.3 974.6 - 97.0
22 1,848.8 1,467.9 1,356.0 1,038.6 492.8 429.3
Non-Financial Assets:
Prepayments and others 53.8 49.8 46.9 42.7 6.9 7.1
1,902.6 1,517.7 1,402.9 1,081.3 499.7 436.4
NOTES TO THEFINANCIAL STATEMENTS
134 ANNUAL REPORT 2012 [ MORE TO LIFE ]
20 INSURANCE RECEIVABLES
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011 2012 2011
Due from policyholders:
Outstanding premiums 201.9 192.4 19.8 17.4 182.1 175.0 - -
Policy loans 2,268.2 2,251.3 - - 2,268.2 2,251.3 - -
Due from reinsurers:
Reinsurance assets 112.3 114.4 111.0 113.1 1.3 1.3 - -
22 2,582.4 2,558.1 130.8 130.5 2,451.6 2,427.6 - -
Reinsurance assets comprise the
following:
Unexpired risk reserve 16 39.5 37.6 39.5 37.6 - - - -
Loss reserve 17 63.5 66.8 63.5 66.8 - - - -
Amounts due from reinsurers 9.3 10.0 8.0 8.7 1.3 1.3 - -
Total assets arising from reinsurance
contracts 112.3 114.4 111.0 113.1 1.3 1.3 - -
21 AMOUNTS DUE FROM/(TO) SUBSIDIARIES AND JOINT VENTURES
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011 2012 2011
Amounts due from subsidiaries - - - - - - 998.2 551.0
Loans to subsidiaries - - - - - - 9.1 173.3
Provision for impairment of unsecured
loan to subsidiary 6 - - - - - - (7.0) (7.0)
22 - - - - - - 1,000.3 717.3
Amount due to joint venture - (0.1) - (0.1) - - - -
The amounts due from subsidiaries and loans to subsidiaries are unsecured, interest-free and repayable on demand.
NOTES TO THEFINANCIAL STATEMENTS
135GREAT EASTERN HOLDINGS LIMITED
22 LOANS AND RECEIVABLES
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011 2012 2011
Loans comprise the following:
Secured loans 1,085.3 1,203.9 38.2 46.5 1,047.1 1,157.4 - -
Unsecured loans 0.8 0.7 - - 0.8 0.7 - -
1,086.1 1,204.6 38.2 46.5 1,047.9 1,158.1 - -
Provision for impairment of
secured loans 6 2.1 2.1 2.1 2.1 - - - -
1,084.0 1,202.5 36.1 44.4 1,047.9 1,158.1 - -
If loans were carried at fair value, the carrying amounts would be as follows:
Loans 1,116.2 1,228.8 36.3 44.4 1,079.9 1,184.4 - -
Loans and receivables:
Cash and cash equivalents 4,212.6 7,248.9 588.5 713.1 3,624.1 6,535.8 57.8 9.0
Other debtors and interfund balances 19 1,848.8 1,467.9 1,356.0 1,038.6 492.8 429.3 - -
Insurance receivables 20 2,582.4 2,558.1 130.8 130.5 2,451.6 2,427.6 - -
Loans 1,084.0 1,202.5 36.1 44.4 1,047.9 1,158.1 - -
Amounts due from subsidiaries and
joint ventures 21 - - - - - - 1,000.3 717.3
Total loans and receivables at
amortised cost 9,727.8
12,477.4 2,111.4 1,926.6 7,616.4
10,550.8 1,058.1 726.3
NOTES TO THEFINANCIAL STATEMENTS
136 ANNUAL REPORT 2012 [ MORE TO LIFE ]
23 DERIVATIVE FINANCIAL INSTRUMENTS
in Singapore Dollars (millions)
Notional
Principal
Derivative
Financial
Assets
Derivative
Financial
Liabilities
Notional
Principal
Derivative
Financial
Assets
Derivative
Financial
Liabilities
2012 2012 2012 2011 2011 2011
23.1 Total
Foreign exchange:
Forwards 4,793.2 23.7 (8.4) 2,595.2 16.1 (31.0)
Currency swaps 2,405.2 320.6 (32.7) 2,930.8 311.6 (24.4)
Interest rates:
Swaps 1,306.2 146.1 (0.8) 1,749.1 109.4 (6.7)
Exchange traded futures - 0.2 (0.1) 10.9 0.8 -
Equity:
Options 0.2 0.1 - 24.7 0.1 -
8,504.8 490.7 (42.0) 7,310.7 438.0 (62.1)
23.2 Shareholders’ and General
Insurance Funds
Foreign exchange:
Forwards 243.2 0.9 (0.2) 140.4 0.4 (1.1)
Currency swaps 13.2 1.2 - 27.7 2.2 (0.1)
256.4 2.1 (0.2) 168.1 2.6 (1.2)
23.3 Life Assurance Fund
Foreign exchange:
Forwards 4,550.0 22.8 (8.2) 2,454.8 15.7 (29.9)
Currency swaps 2,392.0 319.4 (32.7) 2,903.1 309.4 (24.3)
Interest rates:
Swaps 1,306.2 146.1 (0.8) 1,749.1 109.4 (6.7)
Exchange traded futures - 0.2 (0.1) 10.9 0.8 -
Equity:
Options 0.2 0.1 - 24.7 0.1 -
8,248.4 488.6 (41.8) 7,142.6 435.4 (60.9)
The table above shows the fair value of derivative financial instruments, recorded as assets or liabilities together
with their notional amounts. The notional amount, recorded gross, is the amount of a derivative’s underlying asset,
reference rate or index and the basis upon which changes in the value of derivatives are measured.
The fair value of derivatives shown above represents the current risk exposure but not the maximum risk exposure that
would arise in the future as a result of the changes in value.
NOTES TO THEFINANCIAL STATEMENTS
137GREAT EASTERN HOLDINGS LIMITED
24 INVESTMENTS
Group
in Singapore Dollars (millions)
Total
Shareholders’ and
General Insurance
Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011
24.1 Available-for-sale financial assets
Equity securities
(i) Quoted equity securities 8,987.2 9,458.2 969.4 1,115.2 8,017.8 8,343.0
(ii) Unquoted equity securities 647.1 702.0 0.4 0.4 646.7 701.6
9,634.3 10,160.2 969.8 1,115.6 8,664.5 9,044.6
Provision for impairment of quoted
equity securities 6 53.9 64.4 1.6 1.4 52.3 63.0
Provision for impairment of unquoted
equity securities 6 34.3 34.2 - - 34.3 34.2
9,546.1 10,061.6 968.2 1,114.2 8,577.9 8,947.4
Debt securities
(iii) Quoted debt securities (1) 17,171.2 13,188.3 1,801.4 1,151.7 15,369.8 12,036.6
(iv) Unquoted debt securities 12,646.2 10,837.5 453.1 454.8 12,193.1 10,382.7
29,817.4 24,025.8 2,254.5 1,606.5 27,562.9 22,419.3
Provision for impairment of quoted
debt securities 6 0.2 0.2 - - 0.2 0.2
Provision for impairment of unquoted
debt securities 6 2.8 2.8 2.8 2.8 - -
29,814.4 24,022.8 2,251.7 1,603.7 27,562.7 22,419.1
Other investments
(v) Collective investment schemes (2) 1,559.2 1,412.8 181.6 173.3 1,377.6 1,239.5
Provision for impairment of collective
investment schemes 6 3.2 4.3 1.0 1.2 2.2 3.1
1,556.0 1,408.5 180.6 172.1 1,375.4 1,236.4
Total Available-for-sale financial assets 40,916.5 35,492.9 3,400.5 2,890.0 37,516.0 32,602.9
NOTES TO THEFINANCIAL STATEMENTS
138 ANNUAL REPORT 2012 [ MORE TO LIFE ]
24 INVESTMENTS (continued)
Group
in Singapore Dollars (millions)
Total
Shareholders’ and
General Insurance
Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011
24.2 Securities at fair value through profit or
loss
Equity securities
(i) Quoted equity securities 2,151.3 1,904.3 - - 2,151.3 1,904.3
2,151.3 1,904.3 - - 2,151.3 1,904.3
Debt securities
(ii) Quoted debt securities 388.1 343.7 - - 388.1 343.7
(iii) Unquoted debt securities 435.6 376.7 - - 435.6 376.7
823.7 720.4 - - 823.7 720.4
Other investments
(iv) Collective investment schemes (2) 1,038.5 942.6 - - 1,038.5 942.6
Total securities at fair value through profit or
loss (3) 4,013.5 3,567.3 - - 4,013.5 3,567.3
24.3 Financial instruments held-for-trading
(i) Financial instruments with embedded
derivatives 1,895.7 1,092.7 208.2 167.3 1,687.5 925.4
Total financial instruments held-for-trading 1,895.7 1,092.7 208.2 167.3 1,687.5 925.4
TOTAL INVESTMENTS 46,825.7 40,152.9 3,608.7 3,057.3 43,217.0 37,095.6
(1)
regulator as statutory deposits.
(2) Collective investment schemes include but are not limited to unit trusts, hedge funds and real estate investment funds.
(3)
NOTES TO THEFINANCIAL STATEMENTS
139GREAT EASTERN HOLDINGS LIMITED
25 ASSETS HELD FOR SALE
Group
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011
Carrying Value:
At 1 January 4.4 - 4.4 - - -
Reclassification from investment properties 29 3.0 4.4 3.0 4.4 - -
Disposals (4.4) - (4.4) - - -
At 31 December 3.0 4.4 3.0 4.4 - -
The Group has entered into Sale and Purchase Agreements to dispose certain investment properties. The disposals have
not been completed as at 31 December 2012. Details of the properties are as follows:
Location of Property
Sale Consideration
Carrying Value
at 31 December 2012
S$mil S$mil
Ipoh 0.9 0.8
Petaling Jaya 0.9 0.9
Kuala Lumpur 1.5 1.3
3.3 3.0
26 ASSOCIATES AND JOINT VENTURES
Group
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011
Associates 26.1 255.4 245.9 7.1 7.1 248.3 238.8
Joint ventures 26.2 67.5 74.3 67.5 74.0 - 0.3
Carrying amount at 31 December 322.9 320.2 74.6 81.1 248.3 239.1
NOTES TO THEFINANCIAL STATEMENTS
140 ANNUAL REPORT 2012 [ MORE TO LIFE ]
26 ASSOCIATES AND JOINT VENTURES (continued)
Group
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011
26.1 Associates
Investment in shares, at cost 210.3 234.3 9.3 9.3 201.0 225.0
Share of post-acquisition results 53.6 11.1 (2.2) (2.2) 55.8 13.3
Currency translation adjustment (8.5) 0.5 - - (8.5) 0.5
45.1 11.6 (2.2) (2.2) 47.3 13.8
Carrying amount at 31 December 26 255.4 245.9 7.1 7.1 248.3 238.8
Fair value of investment in associates for which there
is published price quotation 252.3 246.4 7.1 7.1 245.2 239.3
For the current financial period, the Group recognised its share of the associates’ operating results based on unaudited
records available up to 30 November 2012.
The summarised financial information of the associates, not adjusted for the proportion of ownership interest held by
the Group, is as follows:
in Singapore Dollars (millions) Total Assets Total Liabilities Revenue
Profit for
the year
Total as at 31 December 2012 1,281.0 (480.8) 202.3 120.5
Total as at 31 December 2011 1,222.9 (472.1) 59.2 33.9
Group
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011
26.2 Joint Ventures
Investment in shares, at cost 102.8 102.8 102.8 102.8 - -
Share of post-acquisition results (32.2) (28.8) (32.2) (29.1) - 0.3
Currency translation adjustment (3.1) 0.3 (3.1) 0.3 - -
(35.3) (28.5) (35.3) (28.8) - 0.3
Carrying amount at 31 December 26 67.5 74.3 67.5 74.0 - 0.3
NOTES TO THEFINANCIAL STATEMENTS
141GREAT EASTERN HOLDINGS LIMITED
26 ASSOCIATES AND JOINT VENTURES (continued)
26.2 Joint Ventures (continued)
The aggregate amounts of each of non-current assets, current assets, non-current liabilities, current liabilities, revenue
and expenses related to the Group’s interests in the jointly-controlled entities are as follows:
in Singapore Dollars (millions)
Non-
Current
Assets
Current
Assets
Non-
Current
Liabilities
Current
Liabilities Revenue Expenses
Total as at 31 December 2012 45.3 151.2 (90.9) (38.1) 38.6 (41.7)
Total as at 31 December 2011 41.2 141.4 (76.3) (32.1) 30.4 (39.6)
As at balance sheet date, there are no outstanding capital commitments or guarantees relating to the above associates
and joint ventures.
There are no restrictions placed on the ability of the associates or joint ventures to transfer funds to the parent
company in the form of cash dividends or for the repayment of loans when due.
27 SUBSIDIARIES
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011 2012 2011
Investment in shares, at cost - - - - - - 959.1 959.1
Distribution from pre-acquisition
reserve - - - - - - (281.8) (281.8)
- - - - - - 677.3 677.3
NOTES TO THEFINANCIAL STATEMENTS
142 ANNUAL REPORT 2012 [ MORE TO LIFE ]
28 GOODWILL
Group
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011
Cost:
At 1 January 32.9 25.5 26.1 18.7 6.8 6.8
Additions - acquisition of a subsidiary/business 8.1 7.4 8.1 7.4 - -
Currency translation reserve adjustment (0.1) - (0.1) - - -
At 31 December 40.9 32.9 34.1 26.1 6.8 6.8
Impairment:
At 1 January and 31 December (6.8) (6.8) - - (6.8) (6.8)
Net carrying amount:
At 1 January 26.1 18.7 26.1 18.7 - -
Additions - acquisition of a subsidiary/business 8.1 7.4 8.1 7.4 - -
Currency translation reserve adjustment (0.1) - (0.1) - - -
At 31 December 34.1 26.1 34.1 26.1 - -
The acquisition of an additional stake of 9.6% in Lion Global Investors Limited group in 2005, the acquisition of certain
assets and liabilities of the general insurance business of Tahan Insurance Malaysia Berhad in 2011 and the acquisition
of a subsidiary, Pacific Mutual Fund Berhad, in 2012 gave rise to $18.7 million, $7.4 million and $8.1 million of goodwill
respectively in Shareholders’ Fund, while the acquisition of an additional 51% of the ordinary shares in Straits Eastern Square
Pte Ltd (“SESPL”) in 2006 gave rise to an amount of $6.8 million of goodwill in Life Assurance Fund.
28.1 Acquisition of a subsidiary
On 30 October 2012 (the “acquisition date”), the Group’s subsidiary company, Lion Global Investors Limited (“LGI”)
acquired 70% of the share capital of Pacific Mutual Fund Berhad (“PMFB”), a fund management company in Malaysia,
for a cash consideration of $13.2 million. Upon the acquisition, PMFB became a subsidiary of the Group.
The Group has acquired PMFB to provide a direct foothold in the Malaysia fund management industry through an
established locally-licensed entity.
The Group has elected to measure the non-controlling interest at the non-controlling interest’s proportionate share of
PMFB’s net identifiable assets.
The fair value of the identifiable assets and liabilities of PMFB as at the acquisition date were:
in Singapore Dollars (millions) Note
Fair value
recognised
on acquisition
Cash and cash equivalents 10.8
Loans 0.3
Property, plant and equipment 30 0.6
11.7
NOTES TO THEFINANCIAL STATEMENTS
143GREAT EASTERN HOLDINGS LIMITED
28 GOODWILL (continued)
28.1 Acquisition of a subsidiary (continued)
in Singapore Dollars (millions) Note
Fair value
recognised on
acquisition
Other creditors 1.1
Income tax payable 0.2
1.3
Total identifiable net assets at fair value 10.4
Non-controlling interest measured at the non-controlling interest’s
proportionate share of PMFB’s net identifiable assets (5.3)
Goodwill arising from acquisition 8.1
Cash consideration paid 13.2
Effect of the acquisition of PMFB on cash flows
Total consideration for 70% equity interest acquired settled in cash 13.2
Less: Cash and cash equivalents of subsidiary acquired (10.8)
Net cash outflow on acquisition (2.4)
Goodwill arising from acquisition
The goodwill of $8.1 million arises from the excess of the fair value of the consideration over the fair value of the
identifiable net asset less the non-controlling interest’s proportionate share of PMFB’s net identifiable assets. None of
the goodwill recognised is expected to be deductible for income tax purposes.
The fair value of the assets acquired, liabilities assumed and goodwill recognised would be confirmed upon the
completion of the purchase price allocation exercise.
Impact of the acquisition on profit and loss
From the acquisition date, PMFB has contributed $1.3 million of revenue and $0.2 million to the Group’s profit for the
year. If the business combination had taken place at the beginning of the year, the revenue from continuing operations
would have been $12.7 million and the Group’s profit from continuing operations, net of tax would have been $1.0
million.
NOTES TO THEFINANCIAL STATEMENTS
144 ANNUAL REPORT 2012 [ MORE TO LIFE ]
28 GOODWILL (continued)
28.2 Acquisition of a business
On 1 January 2011 (the “acquisition date”), the Group’s subsidiary company, Overseas Assurance Corporation
(Malaysia) Berhad (“OACM”) acquired certain assets and liabilities of the general insurance business of Tahan Insurance
Malaysia Berhad (“Tahan”) for a cash consideration of $6.1 million.
The Group acquired Tahan in order to consolidate and create a stronger general insurance industry presence in
Malaysia.
The fair value of the identifiable assets and liabilities of Tahan as at the acquisition date were:
in Singapore Dollars (millions) Note
Fair value
recognised on
acquisition
Cash and cash equivalents 16.1
Other debtors 5.1
Insurance receivables 3.5
Investments 34.8
Investment properties 29 9.2
Property, plant and equipment 30 5.4
74.1
Unexpired risk reserve 16 (8.1)
Other creditors (8.5)
General insurance fund 17 (58.8)
(75.4)
Total identifiable net liabilities at fair value (1.3)
Goodwill arising from acquisition 7.4
Cash consideration paid 6.1
Effect of the acquisition of the business on cash flows
Total consideration for business acquired settled in cash 6.1
Less: Cash and cash equivalents of business acquired (16.1)
Net cash inflow on acquisition 10.0
Other debtors and insurance receivables acquired
Other debtors and insurance receivables acquired comprise of trade and other receivables, outstanding premiums
and amounts due from reinsurers with fair values of $5.1 million, $0.9 million and $2.6 million, respectively. Their
gross amounts are $5.1 million, $6.5 million and $8.7 million, respectively. At the acquisition date, $5.6 million and
$6.1 million of the contractual cash flows pertaining to outstanding premiums and amounts due from reinsurers,
respectively, are not expected to be collected. It is expected that the full contractual amount of the trade and other
receivables can be collected.
NOTES TO THEFINANCIAL STATEMENTS
145GREAT EASTERN HOLDINGS LIMITED
28 GOODWILL (continued)
28.2 Acquisition of a business (continued)
Goodwill arising from acquisition
The goodwill of $7.4 million arises from the excess of the fair value of the consideration over the fair value of the
identifiable net liabilities. Goodwill is allocated entirely to the business of OACM. None of the goodwill recognised is
expected to be deductible for income tax purposes.
The fair values of the assets acquired, liabilities assumed, and goodwill recognised would be subject to revision
pending the outcome of arbitration proceeding on the valuation of the claims liabilities transferred from Tahan to the
Group on 1 January 2011.
Impact of the acquisition on profit and loss
From the acquisition date, Tahan has contributed $12.8 million of revenue and $9.5 million to the Group’s profit for the year.
28.3 Impairment test for goodwill
In accordance with FRS 36, the carrying value of the Group’s goodwill on acquisition of subsidiaries and businesses
was assessed for impairment. In respect of the acquisition of the additional interest in Lion Global Investors Limited
group, goodwill is allocated for impairment testing purposes to the individual entity which is also the cash-generating
unit. Goodwill arising from the acquisition of Straits Eastern Square Pte Ltd is allocated for impairment testing to
the investment property held which is also the cash-generating unit. Goodwill arising from the acquisition of the
business of Tahan Insurance Malaysia Berhad is allocated for impairment testing purposes to the business of Overseas
Assurance Corporation (Malaysia) Berhad, which is also the cash-generating unit.
Subsidiary - Lion Global Investors Limited
Carrying value of capitalised goodwill as at 31 December 2012 $18.7 million
Basis on which recoverable values are determined (1) Value in use
Terminal growth rate (2) 2%
Discount rate (3) 10%
Subsidiary - Straits Eastern Square Pte Ltd
Carrying value of capitalised goodwill as at 31 December 2012 nil
Basis on which recoverable values are determined (4) Fair value of investment property held, less cost to sell
Business acquired - Tahan Insurance Malaysia Berhad
Carrying value of capitalised goodwill as at 31 December 2012 $7.2 million
Basis on which recoverable values are determined (1) Value in use
Terminal growth rate (2) 5%
Discount rate (3) 11%
(1)
(2)
(3)
(4)
No impairment loss was required to be recognised for the financial year ended 31 December 2012 (2011: nil) against the
amounts of goodwill recorded above as the recoverable values were in excess of the carrying values. A reasonably possible
change in key assumptions will not cause the carrying values above to materially exceed the recoverable amounts.
NOTES TO THEFINANCIAL STATEMENTS
146 ANNUAL REPORT 2012 [ MORE TO LIFE ]
29 INVESTMENT PROPERTIES
Group
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
Note 2012 2011 2012 2011 2012 2011
Balance sheet:
At 1 January 1,411.8 1,355.4 5.1 - 1,406.7 1,355.4
Additions (subsequent expenditure) 0.5 4.9 - - 0.5 4.9
Acquisition of a business 28 - 9.2 - 9.2 - -
Net gain from fair value adjustments 5 129.5 52.7 - 0.3 129.5 52.4
Disposals/assets written off (1.9) (2.0) (1.9) - - (2.0)
Reclassification to assets held for sale 25 (3.0) (4.4) (3.0) (4.4) - -
Currency translation reserve adjustment (5.3) (4.0) (0.2) - (5.1) (4.0)
At 31 December 1,531.6 1,411.8 - 5.1 1,531.6 1,406.7
Revenue statements:
Rental income from investment properties:
- Minimum lease payments 79.8 79.0 0.1 0.6 79.7 78.4
Direct operating expenses (including repairs and
maintenance) arising from:
- Rental generating properties (22.1) (20.5) - - (22.1) (20.5)
- Non-rental generating properties (0.2) (1.7) - - (0.2) (1.7)
(22.3) (22.2) - - (22.3) (22.2)
Investment properties within the Life Assurance Funds collectively form an asset class which is an integral part of the overall
investment strategy for the asset-liability management of the life assurance business.
Fair value of the investment properties as at 31 December 2012 is determined based on objective valuations undertaken
by independent valuers at the balance sheet date. Valuations are performed by accredited independent valuers with recent
experience in the location and category of the properties being valued. The valuations are based primarily on the comparable
method and the income method. The comparable method involves the analysis of transactions of comparable properties
in the subject/comparable vicinities with adjustments made for differences in location, floor area, tenure, age and condition,
quality and finishes, date of transaction and prevailing market condition amongst other factors affecting value. The income
method makes reference to estimated market rental values and equivalent yields. The fair value is supported by market
evidence and represents the amount at which assets could be exchanged between a knowledgeable, willing buyer and a
knowledgeable, willing seller in an arm’s length transaction at the date of valuation.
There was no reclassification (2011: nil) from property, plant and equipment during the period for assets which qualify for
recognition as part of investment properties.
NOTES TO THEFINANCIAL STATEMENTS
147GREAT EASTERN HOLDINGS LIMITED
30 PROPERTY, PLANT AND EQUIPMENT
Group
in Singapore Dollars (millions) Note
Freehold
Land (1)
Leasehold
Land (1)
Capital
Works in
Progress Buildings (1)
Computer
Equipment
and Software
Development
Costs
Other
Assets (2) Total
30.1 TOTAL
Cost
At 1 January 2011 62.4 40.0 9.1 628.2 304.5 83.8 1,128.0
Additions - - 13.1 - 20.7 8.1 41.9
Acquisition of a business 28 4.0 - - 0.9 0.2 0.3 5.4
Disposals/assets written off - - (0.1) - (4.0) (2.4) (6.5)
Reclassification - - (2.6) - - 2.6 -
Currency translation reserve
adjustment (0.1) (0.2) - (3.2) (2.9) (1.1) (7.5)
Cost at 31 December 2011
and 1 January 2012 66.3 39.8 19.5 625.9 318.5 91.3 1,161.3
Additions - - 16.5 0.6 22.6 5.4 45.1
Acquisition of a subsidiary 28 - - - - 0.4 0.2 0.6
Disposals/assets written off - (0.3) - (0.4) (1.3) (0.2) (2.2)
Reclassification - - (5.4) 0.5 - 4.9 -
Currency translation
reserve adjustment (0.2) (0.2) (0.1) (4.2) (4.0) (1.7) (10.4)
Cost at 31 December 2012 66.1 39.3 30.5 622.4 336.2 99.9 1,194.4
Accumulated Depreciation
At 1 January 2011 (1.4) (2.4) - (168.8) (168.8) (59.1) (400.5)
Depreciation charge for the
year - - - (13.6) (27.2) (6.9) (47.7)
Disposals/assets written off - - - - 3.6 2.1 5.7
Currency translation reserve
adjustment - 0.2 - 0.6 1.7 0.7 3.2
Accumulated depreciation at
31 December 2011 and 1
January 2012 (1.4) (2.2) - (181.8) (190.7) (63.2) (439.3)
Depreciation charge for the
year - (0.1) - (13.5) (29.0) (7.3) (49.9)
Disposals/assets written off - - - 0.1 1.3 0.2 1.6
Currency translation
reserve adjustment - 0.2 - 0.9 2.4 1.1 4.6
Accumulated depreciation
at 31 December 2012 (1.4) (2.1) - (194.3) (216.0) (69.2) (483.0)
Net Book Value
Net Book Value, at 31
December 2011 64.9 37.6 19.5 444.1 127.8 28.1 722.0
Net Book Value, at 31
December 2012 64.7 37.2 30.5 428.1 120.2 30.7 711.4
NOTES TO THEFINANCIAL STATEMENTS
148 ANNUAL REPORT 2012 [ MORE TO LIFE ]
30 PROPERTY, PLANT AND EQUIPMENT (continued)
Group
in Singapore Dollars (millions) Note
Freehold
Land (1)
Leasehold
Land (1)
Capital
Works in
Progress Buildings (1)
Computer
Equipment
and Software
Development
Costs
Other
Assets (2) Total
30.2 SHAREHOLDERS’ AND
GENERAL INSURANCE
FUNDS
Cost
At 1 January 2011 - - - - 9.9 5.7 15.6
Additions - - - - 3.3 3.5 6.8
Acquisition of a business 28 4.0 - - 0.9 0.2 0.3 5.4
Disposals/assets written off - - - - (1.5) (2.3) (3.8)
Reclassification - - - - (0.2) - (0.2)
Currency translation reserve
adjustment - - - - (0.2) (0.1) (0.3)
Cost at 31 December 2011
and 1 January 2012 4.0 - - 0.9 11.5 7.1 23.5
Additions - - - - 1.7 0.5 2.2
Acquisition of a subsidiary 28 - - - - 0.4 0.2 0.6
Disposals/assets written off - - - - (0.1) (0.1) (0.2)
Currency translation
reserve adjustment (0.1) - - - (0.2) (0.2) (0.5)
Cost at 31 December 2012 3.9 - - 0.9 13.3 7.5 25.6
Accumulated Depreciation
At 1 January 2011 - - - - (6.8) (4.1) (10.9)
Depreciation charge for the
year - - - - (1.3) (1.3) (2.6)
Disposals/assets written off - - - - 1.1 2.0 3.1
Currency translation reserve
adjustment - - - - 0.2 0.1 0.3
Accumulated depreciation at
31 December 2011 and 1
January 2012 - - - - (6.8) (3.3) (10.1)
Depreciation charge for the
year - - - - (2.0) (1.2) (3.2)
Disposals/assets written off - - - - 0.1 0.1 0.2
Currency translation
reserve adjustment - - - - 0.1 0.1 0.2
Accumulated depreciation
at 31 December 2012 - - - - (8.6) (4.3) (12.9)
Net Book Value
Net Book Value, at 31
December 2011 4.0 - - 0.9 4.7 3.8 13.4
Net Book Value, at 31
December 2012 3.9 - - 0.9 4.7 3.2 12.7
NOTES TO THEFINANCIAL STATEMENTS
149GREAT EASTERN HOLDINGS LIMITED
30 PROPERTY, PLANT AND EQUIPMENT (continued)
Group
in Singapore Dollars (millions) Note
Freehold
Land (1)
Leasehold
Land (1)
Capital
Works in
Progress Buildings (1)
Computer
Equipment
and Software
Development
Costs
Other
Assets (2) Total
30.3 LIFE ASSURANCE FUND
Cost
At 1 January 2011 62.4 40.0 9.1 628.2 294.6 78.1 1,112.4
Additions - - 13.1 - 17.4 4.6 35.1
Disposals/assets written off - - (0.1) - (2.5) (0.1) (2.7)
Reclassification - - (2.6) - 0.2 2.6 0.2
Currency translation reserve
adjustment (0.1) (0.2) - (3.2) (2.7) (1.0) (7.2)
Cost at 31 December 2011
and 1 January 2012 62.3 39.8 19.5 625.0 307.0 84.2 1,137.8
Additions - - 16.5 0.6 20.9 4.9 42.9
Disposals/assets written off - (0.3) - (0.4) (1.2) (0.1) (2.0)
Reclassification - - (5.4) 0.5 - 4.9 -
Currency translation
reserve adjustment (0.1) (0.2) (0.1) (4.2) (3.8) (1.5) (9.9)
Cost at 31 December 2012 62.2 39.3 30.5 621.5 322.9 92.4 1,168.8
Accumulated Depreciation
At 1 January 2011 (1.4) (2.4) - (168.8) (162.0) (55.0) (389.6)
Depreciation charge for the
year - - - (13.6) (25.9) (5.6) (45.1)
Disposals/assets written off - - - - 2.5 0.1 2.6
Currency translation reserve
adjustment - 0.2 - 0.6 1.5 0.6 2.9
Accumulated depreciation at
31 December 2011 and 1
January 2012 (1.4) (2.2) - (181.8) (183.9) (59.9) (429.2)
Depreciation charge for the
year - (0.1) - (13.5) (27.0) (6.1) (46.7)
Disposals/assets written off - - - 0.1 1.2 0.1 1.4
Currency translation
reserve adjustment - 0.2 - 0.9 2.3 1.0 4.4
Accumulated depreciation
at 31 December 2012 (1.4) (2.1) - (194.3) (207.4) (64.9) (470.1)
Net Book Value
Net Book Value, at 31
December 2011 60.9 37.6 19.5 443.2 123.1 24.3 708.6
Net Book Value, at 31
December 2012 60.8 37.2 30.5 427.2 115.5 27.5 698.7
NOTES TO THEFINANCIAL STATEMENTS
150 ANNUAL REPORT 2012 [ MORE TO LIFE ]
30 PROPERTY, PLANT AND EQUIPMENT (continued)
As at year end, the Company held furniture and fittings with a net book value of $0.1 million (2011: $0.1 million).
Depreciation for the year on motor vehicles was $0.1 million. (2011: $0.1 million)
There was no reclassification (2011: nil) from property, plant and equipment during the year for assets which qualify for
recognition as part of investment properties.
(1) If the freehold land, leasehold land and buildings were measured using market value, the carrying amount would be as follows:
Group
in Singapore Dollars (millions) 2012 2011
Freehold land, Leasehold land and Buildings 721.1 705.2
(2) Other assets include motor vehicles, office furniture, fittings and equipment.
31 EXECUTIVES’ SHARE OPTION SCHEME
31.1 OCBC Share Option Scheme
In April 2005, the GEH Optionholders were nominated to participate in the OCBC Bank Share Option Scheme (2001)
(“OCBC Option Scheme”). The acquisition price of the options granted is equal to the average of the last traded price
of the ordinary shares of OCBC Bank over five consecutive days immediately prior to the date of the grant. The options
vest in one-third increments over a period of three years, and are exercisable after the first anniversary of the date of
grant up to the date of expiration of the options. The share options have a validity period of 10 years from date of
grant.
The fair value of the share options is recognised by the GEH Group as staff costs in the Profit and Loss Statement or
Revenue Statements of the respective insurance funds, as appropriate. The Group uses the binomial model to derive
the fair value of share options granted by OCBC Bank. The value of the share options is recognised in the Profit and
Loss Statement or Revenue Statements over the vesting period of the share options. At each balance sheet date,
the Group revises its estimates of the number of options that are expected to become exercisable, and the impact
of the change to the original estimates, if any, is recognised in the Profit and Loss Statement or Revenue Statements
accordingly.
At the Extraordinary General Meeting of OCBC Bank held on 19 April 2007, certain alterations proposed by OCBC
Bank’s Remuneration Committee to OCBC Option Scheme were approved by its shareholders. These alterations
enable option holders to select one of the following alternatives when exercising their options:
(i) All share election - an election to receive in full the number of ordinary shares upon full payment of the aggregate
acquisition cost in respect of options exercised;
(ii) Partial share election - an election to receive ordinary shares representing the notional profit which would have
been derived if the ordinary shares in respect of the options exercised had been sold; or
(iii) Cash election - an election to receive in cash the profit derived from the sale of OCBC Bank’s share in respect of
the options exercised.
In March 2012, OCBC Bank granted 1,666,700 options (2011: 606,832) to GEH Optionholders to acquire ordinary
shares in OCBC Bank (“OCBC shares”) pursuant to 2001 scheme. 562,441 options were granted to directors of
the Company (2011: nil). The fair value of share options granted during the financial year ended 31 December 2012,
determined using the binomial valuation model, was $2.4 million (2011: $0.9 million). Significant inputs that were used
to determine the fair value of options granted are set out below.
NOTES TO THEFINANCIAL STATEMENTS
151GREAT EASTERN HOLDINGS LIMITED
31 EXECUTIVES’ SHARE OPTION SCHEME (continued)
31.1 OCBC Share Option Scheme (continued)
2012 2011
Acquisition price ($) 8.80 9.35
Average share price from grant date to acceptance date ($) 8.89 9.40
Expected volatility based on last 250 days historical price volatility as of acceptance
date (%) 20.53 18.26
Risk-free rate based on SGS bond yield at acceptance date (%) 1.61 2.45
Expected dividend yield (%) 3.38 3.09
Exercise multiple (times) 1.57 1.57
Option life (years) 10 10
Information with respect to the number of options granted under the OCBC Option Scheme to GEH Optionholders is
as follows:
2012 2011
Number of
Options
Average
Price
Number of
Options
Average
Price
Number of shares comprised in options:
At beginning of year 3,453,170 $7.482 3,604,994 $7.183
Granted during the year 1,666,700 $8.798 606,832 $9.350
Lapsed during the year (108,738) $9.045 (178,128) $8.399
Exercised during the year (916,125) $6.679 (580,528) $7.295
Outstanding at end of year 4,095,007 $8.152 3,453,170 $7.482
Exercisable at end of year 2,015,491 $7.405 2,509,267 $7.067
Weighted average share price underlying the
options exercised during the financial year $9.009 $9.311
Details of the options outstanding as at 31 December 2012 are as follows:
2012
Grant Year Grant Date Exercise Period Acquisition Price Outstanding Exercisable
2004 15.03.2004 16.03.2005 - 14.03.2014 $5.142 7,800 7,800
2005 14.03.2005 15.03.2006 - 13.03.2015 $5.767 15,200 15,200
2005A 08.04.2005 09.04.2006 - 07.04.2015 $5.784 227,400 227,400
2006B 23.05.2006 24.05.2007 - 22.05.2016 $6.580 292,000 292,000
2007B 14.03.2007 15.03.2008 - 13.03.2017 $8.590 427,000 427,000
2008 14.03.2008 15.03.2009 - 13.03.2018 $7.520 497,340 497,340
2009 16.03.2009 17.03.2010 - 15.03.2019 $4.138 159,497 159,497
2010 15.03.2010 16.03.2011 - 14.03.2020 $8.762 398,934 249,810
2011 14.03.2011 15.03.2012 - 13.03.2021 $9.350 440,896 139,444
2012 14.03.2012 15.03.2013 - 13.03.2022 $8.798 1,628,940 -
4,095,007 2,015,491
The carrying amount of the liability recognised on the Group’s balance sheet related to the above equity-settled options
at 31 December 2012 is $2.6 million (31 December 2011: $2.2 million).
As at 31 December 2012, the weighted average remaining contractual life of outstanding options was 6.9 years (2011:
6.2 years). There were 562,441 outstanding number of options held by directors of the Company (2011: nil).
NOTES TO THEFINANCIAL STATEMENTS
152 ANNUAL REPORT 2012 [ MORE TO LIFE ]
31 EXECUTIVES’ SHARE OPTION SCHEME (continued)
31.2 OCBC Deferred Share Plan (“DSP”)
The DSP is a share-based plan implemented in 2003 and administered by the OCBC Remuneration Committee.
The DSP is a discretionary share-based incentive and retention award program extended to executives of OCBC’s
subsidiaries at the discretion of the Remuneration Committee. The awards are granted at no cost to the grantees, on a
deferred basis as part of their performance bonus. Such awards shall lapse by reason of cessation of service but may
be preserved at the discretion of the Remuneration Committee. The DSP does not involve the issue of new shares.
Instead, existing shares will be purchased from the market for release to the grantees at the end of the respective
vesting periods.
During the financial year, total awards of 224,092 (2011: 165,110) OCBC ordinary shares were granted to eligible
executives of GEH Group under the DSP, of which 59,905 (2011: nil) were granted to the directors of the Company.
The fair value of the shares at grant date was $2.0 million (2011: $1.6 million). In addition, total awards of 7,822 OCBC
shares (of which 2,116 were granted to directors of the Company) were awarded to grantees pursuant to declarations
of final dividend for financial year ended 31 December 2011 (2011: 1,954 OCBC shares (of which none were granted
to directors of the Company) awarded to grantees pursuant to declarations of final dividend for financial year ended
31 December 2010).
31.3 OCBC Employee Share Purchase Plan (“ESP”)
All employees of OCBC Bank and their subsidiaries who have attained the age of 21 years and have been employees
for a period of not less than six months are eligible to participate in the ESP Plan unless they are also controlling
shareholders of the Bank or their associates. The purpose of the ESP Plan is to provide employees with an opportunity
to increase their personal equity interest in the Bank. The Bank will either issue new shares or transfer treasury shares
to employees upon the exercise or conversion of acquisition rights. The ESP Plan is administered by the OCBC Bank
Remuneration Committee.
The acquisition price is equal to the average of the last traded price of the ordinary shares of OCBC Bank on the
Singapore Exchange Securities Trading Limited over the five consecutive trading days immediately preceding the
price fixing date for the acquisition price of the ordinary shares (as determined by the OCBC Bank Remuneration
Committee).
A participant may participate in the ESP Plan for an offering period by making contributions in cash by means of
monthly deductions from his monthly base salary and/or his designated account; and/or by monthly debits from his
CPF Ordinary Account to his ESP Plan account.
In June 2012, the seventh offering of the ESP Plan was launched, commencing on 1 July 2012 and expiring on 30
June 2014. Under the offering, OCBC Bank granted 843,422 (2011: 726,467) rights to acquire ordinary shares in the
Bank. The fair value of the rights, determined using the binomial valuation model was $0.8 million (2011: $0.5 million).
Significant inputs to the valuation model are set out below.
2012 2011
Acquisition price ($) 8.68 9.21
Closing share price at valuation date ($) 8.70 9.03
Expected volatility based on last 250 days historical price volatility as of acceptance
date (%) 20.59 16.70
Risk-free rate based on 2-year swap rate (%) 0.15 0.68
Expected dividend yield (%) 2.76 2.57
NOTES TO THEFINANCIAL STATEMENTS
153GREAT EASTERN HOLDINGS LIMITED
31 EXECUTIVES’ SHARE OPTION SCHEME (continued)
31.3 OCBC Employee Share Purchase Plan (“ESP”) (continued)
A summary of the movement in the number of acquisition rights of the ESP Plan issued to GEH Group’s employees
is as follows:
2012 2011
Number of
Subscription
Rights
Weighted
Average
Subscription
Price
Number of
Subscription
Rights
Weighted
Average
Subscription
Price
At 1 January 1,106,826 $9.038 810,900 $7.877
Subscriptions on commencement of plan 843,422 $8.680 726,467 $9.210
Exercised (171,657) $8.809 (338,748) $6.358
Lapsed / Forfeited (423,672) $8.867 (91,793) $6.985
At 31 December 1,354,919 $8.898 1,106,826 $9.038
Average share price underlying acquisition rights
exercised during the year $9.185 $9.523
As at 31 December 2012, the weighted average remaining contractual life of outstanding acquisition rights was 1.1
years (2011: 1.1 years). No director of GEH Group has acquisition rights under the ESP Plan (2011: nil).
32 COMMITMENTS AND CONTINGENT LIABILITIES
32.1 Capital commitments
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
2012 2011 2012 2011 2012 2011 2012 2011
Commitments for capital expenditure
not provided for in the financial
statements:
- investment properties 62.4 71.5 - - 62.4 71.5 - -
- property, plant and equipment 20.7 18.2 2.0 - 18.7 18.2 - -
83.1 89.7 2.0 - 81.1 89.7 - -
NOTES TO THEFINANCIAL STATEMENTS
154 ANNUAL REPORT 2012 [ MORE TO LIFE ]
32 COMMITMENTS AND CONTINGENT LIABILITIES (continued)
32.2 Operating lease commitments
The Group has entered into commercial property leases on its investment property portfolio. These non-cancellable
leases have remaining non-cancellable lease terms of between 1 and 5 years. All leases include a clause to enable
upward revision of the rental charge on an annual basis based on prevailing market conditions.
Future minimum lease payments receivable under non-cancellable operating leases are as follows as of 31 December:
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
2012 2011 2012 2011 2012 2011 2012 2011
Within one year 27.3 27.3 0.3 0.2 27.0 27.1 - -
After one year but not more
than five years 47.8 51.4 - - 47.8 51.4 - -
More than five years 0.2 0.2 - - 0.2 0.2 - -
75.3 78.9 0.3 0.2 75.0 78.7 - -
The Group has entered into operating lease agreements for computer equipment. These non-cancellable leases
have remaining non-cancellable lease terms of between 1 and 4 years. Operating lease payments recognised in the
consolidated Profit and Loss Statement and Revenue Statements during the period amounted to $0.4 million (2011:
$0.1 million).
Future minimum lease payments payable under non-cancellable operating leases contracted for as at 31 December
but not recognised as liabilities, are payable as follows:
Within one year 5.1 4.1 3.1 2.8 2.0 1.3 - -
After one year but not more
than five years 4.3 7.2 1.7 4.1 2.6 3.1 - -
9.4 11.3 4.8 6.9 4.6 4.4 - -
NOTES TO THEFINANCIAL STATEMENTS
155GREAT EASTERN HOLDINGS LIMITED
33 RELATED PARTY TRANSACTIONS
The Group enters into transactions with its related parties in the normal course of business. Transactions are carried out on
an arm’s length basis.
33.1 Sale and purchase of goods and services
In addition to the related party information disclosed elsewhere in the financial statements, the following significant
transactions between the Group and related parties took place at terms agreed between the parties during the financial
year:
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
2012 2011 2012 2011 2012 2011 2012 2011
Management and performance
fees paid by insurance funds to
subsidiaries 44.9 42.7 5.4 4.1 39.5 38.6 - -
Fees and commission and other
income received from:
- holding company 6.5 8.2 6.5 8.2 - - - -
- related parties of the holding
company 1.9 4.0 1.8 1.9 0.1 2.1 - -
Premiums received from key
management personnel 0.4 1.4 - - 0.4 1.4 - -
Fees and commission expense paid
to:
- holding company 69.0 42.3 4.2 1.2 64.8 41.1 - -
- related parties of the holding
company 11.0 23.8 2.3 2.2 8.7 21.6 - -
Interest income received from:
- holding company 4.4 0.8 3.4 0.2 1.0 0.6 - -
- related parties of the holding
company 27.0 19.4 0.8 1.8 26.2 17.6 - -
Rental income received from related
parties of the holding company 0.3 0.4 - - 0.3 0.4 - -
Other expenses paid to:
- holding company 2.6 4.5 0.7 3.0 1.9 1.5 - -
- related parties of the holding
company 20.2 5.2 4.0 1.9 16.2 3.3 - -
NOTES TO THEFINANCIAL STATEMENTS
156 ANNUAL REPORT 2012 [ MORE TO LIFE ]
33 RELATED PARTY TRANSACTIONS (continued)
33.2 Balance sheet balances with related parties
Balance sheet balances with related parties as at 31 December are as follows:
Group Company
in Singapore Dollars (millions)
Total
Shareholders’
and General
Insurance Funds
Life Assurance
Fund
2012 2011 2012 2011 2012 2011 2012 2011
Cash and cash equivalents held with:
- holding company 453.8 408.5 65.1 81.4 388.7 327.1 32.9 8.9
- related parties of the holding
company 643.6 594.6 27.5 37.8 616.1 556.8 - -
Amount due to holding company 2.6 2.2 2.6 2.2 - - - -
Investments in quoted debt securities
and preference shares of:
- holding company 11.9 159.8 - 128.4 11.9 31.4 - -
- related parties of the holding
company 197.1 166.1 - - 197.1 166.1 - -
Derivative financial assets held with:
- holding company 180.0 178.2 1.0 0.4 179.0 177.8 - -
Derivative financial liabilities held with:
- holding company 4.4 9.9 0.2 0.7 4.2 9.2 - -
- related parties of the holding
company 7.8 0.9 - - 7.8 0.9 - -
Outstanding balances at balance sheet date are unsecured and interest free. Settlement will take place in cash.
There was no provision for doubtful debts at the balance sheet date and no bad debt expense for the year (2011: Nil).
33.3 Compensation of key management personnel
Short-term employee benefits 19.8 17.8 8.2 7.6 11.6 10.2 1.5 1.3
Other long-term benefits 1.4 - 0.2 - 1.2 - - -
Central Provident Fund/Employee
Provident Fund 0.6 0.5 0.2 0.2 0.4 0.3 - -
Share-based payments 1.7 1.1 0.2 0.2 1.5 0.9 - -
23.5 19.4 8.8 8.0 14.7 11.4 1.5 1.3
Comprise amounts paid to:
Directors of the Company 6.5 4.8 2.1 1.7 4.4 3.1 1.5 1.3
Other key management personnel 17.0 14.6 6.7 6.3 10.3 8.3 - -
23.5 19.4 8.8 8.0 14.7 11.4 1.5 1.3
NOTES TO THEFINANCIAL STATEMENTS
157GREAT EASTERN HOLDINGS LIMITED
34 SEGMENTAL INFORMATION
Business Segments
For management purposes, the Group’s operating businesses are organised and managed separately according to
the nature of the products and services provided, with each segment representing a strategic business unit that offers
different products for the different markets. The Group’s principal operations are organised into the Life Assurance, General
Insurance and Shareholders segments. The results of these segments are reported separately in internal reports that are
regularly reviewed by the entity’s chief operating decision maker in order to allocate resources to the segment and assess
its performance.
a. Life Assurance Segment
The Life Assurance segment provides different types of products, comprising life insurance, long-term health and
accident insurance, annuity business written and includes the unit-linked business. The Life Assurance segment is
further organised into three reportable segments based on the type of product provided - the Participating Business,
Non-participating Business and Linked Business segments. All revenues in the Life Assurance segment are from
external customers.
Under the Participating Business segment, the insurance contracts issued by subsidiaries within the Group contain
a discretionary participating feature. In addition to guaranteed benefits payable upon insured events associated with
human life such as death or disability, the contract entitles the policyholder to receive benefits, commonly referred
to as a policyholder bonus, which is derived from the investment performance of the pool of assets and operating
experience of all the participating policies managed by each insurance subsidiary within the Group.
Under the Non-participating Business segment, the insurance contracts issued by insurance subsidiaries within the
Group transfer both insurance and investment risks from policyholders to the insurance subsidiaries within the Group.
Other than medical insurance policy contracts, the payout to policyholders upon the occurrence of the insured event
is pre-determined and the transfer of risk is absolute. For medical insurance policy contracts, the payout is dependent
on the actual medical costs incurred upon the occurrence of the insured event.
Under the Linked Business segment, the insurance subsidiaries within the Group issue contracts which transfer
insurance risk alone from policyholders to the insurance subsidiaries within the Group. The net investment returns
derived from the variety of investment funds as selected by the policyholder accrue directly to the policyholder.
b. General Insurance Segment
Under the General Insurance business, the Group issues short term property and casualty contracts which protect
the policyholder against the risk of loss of property premises due to fire or theft in the form of fire or burglary insurance
contract and/or business interruption contract; risk of liability to pay compensation to a third party for bodily harm
or property damage in the form of public liability insurance contract. The Group also issues short term medical and
personal accident general insurance contracts.
c. Shareholders Segment
The Shareholders segment comprises two reportable segments, the Fund Management and Financial Advisory
Business, and Other Shareholders segments.
The Fund Management and Financial Advisory Business segment provides fund management services for absolute
return/balanced mandates with different risk-return characteristics and manages a range of products, including
Asia Pacific equities, Asian and global fixed income securities portfolios. Clients include Singapore statutory boards,
government-linked corporations, public and private companies, insurance companies and charity organisations.
The Other Shareholders segment comprises activities not related to the core business segments, and includes general
corporate income and expense items.
NOTES TO THEFINANCIAL STATEMENTS
158 ANNUAL REPORT 2012 [ MORE TO LIFE ]
34 SEGMENTAL INFORMATION (continued)
Geographical Segments
The Group’s risks and rewards are affected by operating conditions in different countries and geographical areas. Therefore,
for management purposes, the Group is also organised on a geographical basis into Singapore, Malaysia and Other Asia,
based on the location of the Group’s assets. Sales to external customers disclosed in geographical segments are based on
the respective location of its customers.
Segment Accounting Policies, Allocation Basis and Transfer Pricing
The accounting policies of the segments are the same as those described in the summary of significant accounting policies
in Note 2.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated
on a reasonable basis. Unallocated items comprise mainly corporate assets, income tax and deferred tax assets and
liabilities, interest-bearing loans and related expenses. Inter-segment transfers or transactions are entered into under normal
commercial terms and conditions that would also be available to an unrelated third parties. Segment revenue, expenses and
results include transfers between business segments. These transfers are eliminated on consolidation.
(1) By Business Segments
Group Group
in Singapore Dollars (millions)
Fund
Management
and Financial
Advisory
Business Others
Adjustments
and
Eliminations Note Consolidated
2012 2011 2012 2011 2012 2011 2012 2011
(a) Shareholders’ Fund
Investment income, net 0.1 0.1 111.8 115.7 (0.5) (19.4) (1) 111.4 96.4
Gain/(loss) on sale of investments and
changes in fair value - 1.2 562.9 (11.1) - - 562.9 (9.9)
Increase in provision for impairment of
assets - - (0.2) (1.9) - - (0.2) (1.9)
Gain/(loss) on exchange differences 0.9 (0.8) (1.4) 1.2 - - (0.5) 0.4
Profit/(loss) from investments in
Shareholders’ Fund 1.0 0.5 673.1 103.9 (0.5) (19.4) 673.6 85.0
Fees and other income 67.3 68.2 2.7 4.7 (5.2) (3.9) (1) 64.8 69.0
Profit/(loss) before expenses 68.3 68.7 675.8 108.6 (5.7) (23.3) 738.4 154.0
Management and other expenses 36.5 36.4 35.1 35.7 - - 71.6 72.1
Interest expense - - 18.3 18.3 - - 18.3 18.3
Depreciation 0.9 0.9 1.3 1.0 - - 2.2 1.9
Total expenses 37.4 37.3 54.7 55.0 - - 92.1 92.3
Profit/(loss) after expenses 30.9 31.4 621.1 53.6 (5.7) (23.3) 646.3 61.7
Share of loss of joint ventures - - (3.2) (8.4) - - (3.2) (8.4)
Segment profit/(loss) before income tax 30.9 31.4 617.9 45.2 (5.7) (23.3) 643.1 53.3
Income tax (4.3) (4.7) (169.6) (68.6) - - (173.9) (73.3)
Segment profit/(loss) after income tax 26.6 26.7 448.3 (23.4) (5.7) (23.3) 469.2 (20.0)
Reconciliation to consolidated Profit & Loss Statement:
Profit from insurance operations 726.1 411.8
Profit per Profit & Loss Statement 1,195.3 391.8
(1)
NOTES TO THEFINANCIAL STATEMENTS
159GREAT EASTERN HOLDINGS LIMITED
34 SEGMENTAL INFORMATION (continued)
(1) By Business Segments (continued)
Group Group
in Singapore Dollars (millions)
Fund
Management
and Financial
Advisory
Business Others
Adjustments
and
Eliminations Note Consolidated
2012 2011 2012 2011 2012 2011 2012 2011
(a) Shareholders’ Fund (continued)
Other material items:
Interest income 0.1 0.4 73.1 64.2 - - 73.2 64.6
Staff costs and related expenses
(including executive directors
and key management personnel
compensation) 30.0 31.2 37.1 34.9 - - 67.1 66.1
Rental expense 2.3 2.0 3.7 2.9 - - 6.0 4.9
Loss on disposal of property, plant and
equipment - - - 0.1 - - - 0.1
Interest expense - - 18.3 18.3 - - 18.3 18.3
Non-cash items:
Depreciation 0.9 0.9 1.3 1.0 - - 2.2 1.9
Impairment of assets - - 0.2 1.9 - - 0.2 1.9
Changes in fair value of investments:
- through Profit & Loss Statement - - (68.3) 51.5 - - (68.3) 51.5
- through equity 2.4 (2.0) 361.8 (67.0) - - 364.2 (69.0)
in Singapore Dollars (millions) 31 Dec 12 31 Dec 11 31 Dec 12 31 Dec 11 31 Dec 12 31 Dec 11 31 Dec 12 31 Dec 11
Assets and liabilities:
Segment assets 106.2 77.2 5,332.6 4,626.7 14.2 14.2 5,453.0 4,718.1
Investments in associates and joint
ventures - - 74.6 81.1 - - 74.6 81.1
Total assets 106.2 77.2 5,407.2 4,707.8 14.2 14.2 5,527.6 4,799.2
Segment liabilities 15.2 12.9 473.0 669.0 - - 488.2 681.9
Income tax and deferred tax liabilities 4.8 5.4 195.1 169.4 - - 199.9 174.8
Total liabilities 20.0 18.3 668.1 838.4 - - 688.1 856.7
Other segment information:
Additions to non-current assets
- property, plant and equipment 1.4 3.2 0.3 1.6 - - 1.7 4.8
- goodwill 8.1 - - 7.4 - - 8.1 7.4
NOTES TO THEFINANCIAL STATEMENTS
160 ANNUAL REPORT 2012 [ MORE TO LIFE ]
34 SEGMENTAL INFORMATION (continued)
(1) By Business Segments (continued)
(b) General Insurance Fund
The segment profit/(loss) information for general insurance fund has not been presented below as it is considered a
single business segment and disclosure of the information can be found in the General Insurance Revenue Statement.
All revenues in the General Insurance Fund are from external customers. Material non-cash items consist of depreciation
and impairment of assets, which can be found in the General Insurance Revenue Statement.
Group
in Singapore Dollars (millions)
General Insurance Fund
2012 2011
Other material items:
Interest income 12.8 9.9
Staff costs and related expenses (including executive directors
and key management personnel compensation) 20.6 18.5
Rental expense 1.8 2.1
in Singapore Dollars (millions) 31 Dec 12 31 Dec 11
Assets and liabilities:
Total assets 365.9 360.1
Segment liabilities 358.2 349.7
Income tax and deferred tax liabilities 7.7 10.4
Total liabilities 365.9 360.1
Other segment information:
Additions to non-current assets
- property, plant and equipment 1.1 7.4
- investment properties - 9.2
NOTES TO THEFINANCIAL STATEMENTS
161GREAT EASTERN HOLDINGS LIMITED
34 SEGMENTAL INFORMATION (continued)
(1) By Business Segments (continued)
Group
in Singapore Dollars
(millions)
Participating
Business
Non-
Participating
Business
Linked
Business
Adjustments
and
Eliminations Consolidated
2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
(c) Life Assurance Fund
Premiums less
reassurances 3,983.7 3,901.1 1,173.0 1,083.2 1,097.8 1,122.0 - - 6,254.5 6,106.3
Commissions received
from reinsurers 8.5 15.9 2.4 11.0 1.5 3.2 - - 12.4 30.1
Investment income, net 1,436.5 1,402.3 174.9 169.0 106.8 104.6 - - 1,718.2 1,675.9
Rental income, net 53.2 51.8 4.6 4.3 - - (0.4) - 57.4 56.1
Gain/(loss) on sale of
investments and
changes in fair value 2,053.1 86.8 155.6 48.0 312.8 (309.2) - - 2,521.5 (174.4)
(Loss)/gain on exchange
differences (22.9) 77.2 (28.7) 20.6 (2.7) 5.6 - - (54.3) 103.4
Segment revenue 7,512.1 5,535.1 1,481.8 1,336.1 1,516.2 926.2 (0.4) - 10,509.7 7,797.4
Gross claims, surrenders
and annuities 4,106.6 3,290.0 734.9 771.6 595.9 518.7 - - 5,437.4 4,580.3
Claims, surrenders and
annuities recovered from
reinsurers (15.4) (14.0) (35.6) (27.2) (10.0) (8.4) - - (61.0) (49.6)
Commissions and agency
expenses 347.1 348.0 148.9 134.1 210.7 182.3 - - 706.7 664.4
Increase/(decrease) in
provision for impairment
of assets 9.6 20.2 - (4.5) - - - - 9.6 15.7
Management expenses 170.7 154.4 63.0 50.4 76.6 73.2 (0.4) - 309.9 278.0
Agents’ retirement benefits 25.0 23.3 2.2 2.1 7.2 5.8 - - 34.4 31.2
Depreciation 41.0 39.7 3.6 3.5 2.1 1.9 - - 46.7 45.1
Change in life assurance
fund contract liabilities 1,835.1 1,255.6 255.9 342.3 482.5 15.6 - - 2,573.5 1,613.5
Segment expense 6,519.7 5,117.2 1,172.9 1,272.3 1,365.0 789.1 (0.4) - 9,057.2 7,178.6
Segment profit before
share of profit of
associates and joint
ventures 992.4 417.9 308.9 63.8 151.2 137.1 - - 1,452.5 618.8
Share of profit/(loss) of
associates 38.5 (2.6) 1.6 (0.6) - - - - 40.1 (3.2)
Share of loss of joint
ventures (0.3) - - - - - - - (0.3) -
Segment profit before
income tax 1,030.6 415.3 310.5 63.2 151.2 137.1 - - 1,492.3 615.6
Income tax (287.6) (138.5) 2.5 1.4 (23.1) (12.1) - - (308.2) (149.2)
Segment profit after
income tax 743.0 276.8 313.0 64.6 128.1 125.0 - - 1,184.1 466.4
NOTES TO THEFINANCIAL STATEMENTS
162 ANNUAL REPORT 2012 [ MORE TO LIFE ]
34 SEGMENTAL INFORMATION (continued)
(1) By Business Segments (continued)
Group
in Singapore Dollars
(millions)
Participating
Business
Non-
Participating
Business
Linked
Business
Adjustments
and
Eliminations Consolidated
2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
Retained in life assurance
fund 599.0 155.3 (109.5) (69.8) 2.9 (1.6) - - 492.4 83.9
Transferred to Profit and
Loss Statement 144.0 121.5 422.5 134.4 125.2 126.6 - - 691.7 382.5
743.0 276.8 313.0 64.6 128.1 125.0 - - 1,184.1 466.4
Other material items:
Interest income 1,156.9 1,124.2 173.4 166.8 70.2 65.1 - - 1,400.5 1,356.1
Staff costs and
related expenses
(including executive
directors and key
management personnel
compensation) 92.6 89.8 31.5 28.6 34.3 32.8 - - 158.4 151.2
Rental expense 8.5 8.0 3.2 2.8 2.9 2.6 (0.4) - 14.2 13.4
Gain on disposal of
property, plant and
equipment and
investment properties 0.7 0.6 - 0.1 - - - - 0.7 0.7
Interest expense on policy
benefits 100.4 90.3 0.1 0.1 - - - - 100.5 90.4
Non-cash items:
Depreciation 41.0 39.7 3.6 3.5 2.1 1.9 - - 46.7 45.1
Impairment of assets 9.6 20.2 - (4.5) - - - - 9.6 15.7
Changes in fair value of
investments:
- through Profit & Loss
Statement (65.9) 177.8 (117.1) 1.7 (303.7) 263.2 - - (486.7) 442.7
- through life assurance
fund 1,758.6 (100.6) 157.9 108.7 - - - - 1,916.5 8.1
NOTES TO THEFINANCIAL STATEMENTS
163GREAT EASTERN HOLDINGS LIMITED
34 SEGMENTAL INFORMATION (continued)
(1) By Business Segments (continued)
Group
in Singapore Dollars
(millions)
Participating
Business
Non-Participating
Business Linked Business
Adjustments and
Eliminations Consolidated
31 Dec 12 31 Dec 11 31 Dec 12 31 Dec 11 31 Dec 12 31 Dec 11 31 Dec 12 31 Dec 11 31 Dec 12 31 Dec 11
(c) Life Assurance Fund (continued)
Assets and liabilities:
Segment assets 43,143.9 41,024.9 5,488.5 4,814.4 4,926.8 4,364.9 - - 53,559.2 50,204.2
Investments in
associates and joint
ventures 243.9 234.2 4.4 4.9 - - - - 248.3 239.1
Total assets 43,387.8 41,259.1 5,492.9 4,819.3 4,926.8 4,364.9 - - 53,807.5 50,443.3
Segment liabilities 42,288.5 40,264.0 5,273.3 4,651.9 4,895.6 4,348.8 - - 52,457.4 49,264.7
Income tax and
deferred tax liabilities 1,099.3 995.1 219.6 167.4 31.2 16.1 - - 1,350.1 1,178.6
Total liabilities 43,387.8 41,259.1 5,492.9 4,819.3 4,926.8 4,364.9 - - 53,807.5 50,443.3
Other segment information:
Additions to non-
current assets
- property, plant and
equipment 38.5 32.2 3.1 2.2 1.3 0.7 - - 42.9 35.1
- investment
properties 0.4 4.3 0.1 0.6 - - - - 0.5 4.9
NOTES TO THEFINANCIAL STATEMENTS
164 ANNUAL REPORT 2012 [ MORE TO LIFE ]
34 SEGMENTAL INFORMATION (continued)
(2) By Geographical Segments
Group
in Singapore Dollars
(millions)
Singapore Malaysia Other Asia
Adjustments
and
Eliminations Consolidated
2012 2011 2012 2011 2012 2011 2012 2011 2012 2011
(a) Shareholders’ Fund
Investment income, net 94.3 78.8 13.7 13.0 3.4 4.6 - - 111.4 96.4
Gain/(loss) on sale of
investments and
changes in fair value 558.4 (11.9) 4.5 2.0 - - - - 562.9 (9.9)
Fees and other income 63.6 69.0 1.2 - - - - - 64.8 69.0
Total revenue from external
customers 716.3 135.9 19.4 15.0 3.4 4.6 - - 739.1 155.5
Dividend from subsidiaries 214.1 172.7 - - - - (214.1) (172.7) - -
Total revenue 930.4 308.6 19.4 15.0 3.4 4.6 (214.1) (172.7) 739.1 155.5
Profit/(loss) after income
tax 1,180.6 357.8 241.1 226.2 (12.3) (19.5) (214.1) (172.7) 1,195.3 391.8
As at 31 December:
Non-current assets 22.2 23.2 16.0 7.2 0.9 1.3 - - 39.1 31.7
(b) General Insurance Fund
Total revenue from external
customers 65.0 54.6 127.6 112.1 - - - - 192.6 166.7
As at 31 December:
Non-current assets 0.6 0.7 7.1 12.2 - - - - 7.7 12.9
(c) Life Assurance Fund
Total revenue from external
customers 6,060.3 4,158.2 4,328.3 3,492.9 121.1 146.3 - - 10,509.7 7,797.4
As at 31 December:
Non-current assets 1,817.0 1,685.0 408.4 425.7 4.9 4.6 - - 2,230.3 2,115.3
Non-current assets information presented above consist of goodwill, investment properties and property, plant and
equipment as presented in the consolidated balance sheet.
NOTES TO THEFINANCIAL STATEMENTS
165GREAT EASTERN HOLDINGS LIMITED
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES
Governance framework
Managing risk is an integral part of the Group’s core business. As stated in the Enterprise Risk Management (“ERM”)
Framework, the Group shall:
- Always operate within the risk appetite set by the Board; and
- Ensure reward commensurate for any risk taken.
Group Risk Management department spearheads the development and implementation of the ERM Framework for the
Group.
The Risk and Investment Committee (“RIC”) is constituted to provide oversight on the risk management initiatives. At
the group level, detailed risk management and oversight activities are undertaken by the following group management
committees comprising the Group Chief Executive Officer and key Senior Management Executives:
- Group Management Team (“GMT”)
- Group Asset-Liability Committee (“Group ALC”)
- Group Information Technology Steering Committee (“Group ITSC”)
GMT is responsible for providing leadership, direction and oversight with regards to all matters of the Group. The GMT is also
responsible for ensuring compliance and alignment with Group Governance and Oversight Framework, i.e. Group standards
and guidelines. The GMT is supported by the local Senior Management Team (“SMT”) and Product Development Committee
(“PDC”).
Group ALC is responsible for assisting GMT in balance sheet management. Specifically, Group ALC reviews and formulates
technical frameworks, policies and methodology relating to balance sheet management. Group ALC is also responsible for
ensuring compliance and alignment with Group Governance and Oversight Framework, i.e. Group standards and guidelines.
Group ALC is supported by the local Asset-Liability Committee (“ALC”).
Regulatory framework
Insurers are required to comply with the Insurance Act and Regulations, as applicable, including guidelines on investment
limits. The responsibility for the formulation, establishment and approval of the investment policy rests with the respective
Board of Directors (“Board”). The Board exercises oversight on investments to safeguard the interests of policyholders and
shareholders.
Capital management
GEH’s capital management policy is to create shareholder value, deliver sustainable returns to shareholders, maintain
a strong capital position with sufficient buffer to meet policyholders’ obligations and regulatory requirements and make
strategic investments for business growth.
The Group has had no significant changes in the policies and processes relating to its capital structure during the year.
Regulatory Capital
The insurance subsidiaries of the Group are required to comply with capital ratios prescribed by the Insurance Regulations
of the jurisdiction in which the subsidiaries operate. The Capital Adequacy Ratios of the Group’s insurance subsidiaries in
both Singapore and Malaysia remained well above the minimum regulatory ratios of 120% and 130% under the Risk based
Capital Frameworks regulated by the Monetary Authority of Singapore and Bank Negara, Malaysia respectively.
NOTES TO THEFINANCIAL STATEMENTS
166 ANNUAL REPORT 2012 [ MORE TO LIFE ]
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Capital management (continued)
Regulatory Capital (continued)
The Group’s approach to capital management requires sufficient capital to be held to cover statutory requirements, including
any additional amounts required by the respective regulators. This involves managing assets, liabilities and risks in a
coordinated way by assessing and monitoring available and required capital (by each regulated entity) on a regular basis
and, where appropriate, taking suitable actions to influence the capital position of the Group in light of changes in economic
conditions and risk characteristics.
The primary source of capital used by the Group is share capital and issued debt. Available capital of the consolidated
Singapore insurance subsidiaries as at 31 December 2012 amounted to $8.6 billion (31 December 2011: $8.1 billion) while
available capital of the consolidated Malaysia insurance subsidiaries as at 31 December 2012 amounted to $0.7 billion (31
December 2011: $0.7 bilion).
Dividend
GEH’s dividend policy aims to provide shareholders with a predictable and sustainable dividend return, payable on a half-
yearly basis.
Insurance Risk
The principal activities of the Group are the provision of financial advisory services coupled with insurance protection against
risks such as mortality, morbidity (health, disability, critical illness, personal accident), and property and casualty.
The Group’s underwriting strategy is designed to ensure that these risks are well diversified in terms of type of risk and level
of insured benefits. This is largely achieved through diversification across industry sectors and geography, the use of medical
screening in order to ensure that pricing takes account of current health conditions and family medical history, regular review
of actual claims experience and product pricing, as well as detailed claims handling procedures. Underwriting limits are
also set in place to enforce appropriate risk selection criteria. For example, the Group has the right not to renew individual
policies, it can impose deductibles and it has the right to reject the payment of fraudulent claims.
Risks inherent in the Group’s activities include but are not limited to the following:
Insurance Risks of Life Insurance Contracts
Insurance risks arise when the Group underwrites insurance contracts. A mis-estimation of the assumptions used in pricing
the insurance products as well as subsequent setting of the technical provisions may give rise to potential shortfalls when
actual experience is different from expected experience. Sources of assumptions affecting insurance risks include policy
lapses and policy claims such as mortality, morbidity and expenses. These risks do not vary significantly in relation to the
location of the risk insured by the Group, type of risk insured or by industry.
The Group utilises reinsurance to manage the mortality and morbidity risks. The Group’s reinsurance management strategy
and policy are reviewed annually by RIC and Group ALC. Reinsurance structures are set based on the type of risk. Retention
limits for mortality risk per life are limited to a maximum of $700,000 in Singapore and RM350,000 in Malaysia. Retention
limits for critical illness per life are limited to a maximum of $400,000 in Singapore and RM250,000 in Malaysia. Catastrophe
reinsurance is procured to limit catastrophic losses. The Group’s exposure to group insurance business is not significant,
thus there is no material concentrations in insurance risk.
NOTES TO THEFINANCIAL STATEMENTS
167GREAT EASTERN HOLDINGS LIMITED
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Insurance Risk (continued)
Insurance Risks of Life Insurance Contracts (continued)
Only reinsurers meeting a minimum credit rating of S&P A- are considered when deciding on which reinsurers to reinsure the
Group’s risk. The Group limits its risk to any one reinsurer by ceding different products to different reinsurers or to a panel
of reinsurers.
Group ALC reviews the actual experience of mortality, morbidity, lapses and surrenders, and expenses to ensure that the
policies, guidelines and limits put in place to manage the risks remain adequate and appropriate.
A substantial portion of the Group’s life assurance funds is participating in nature. In the event of volatile investment climate
and/or unusual claims experience, the insurer has the option of revising the bonus and dividends payable to policyholders.
For non-participating funds, the risk is that the guaranteed policy benefits must be met even when investment markets
perform poorly, or claims experience is higher than expected.
For investment-linked funds, the risk exposure for the Group is limited only to the underwriting aspect as all investment risks
are borne by the policyholders.
Stress Testing (“ST”) is performed at least once a year. The purpose of the ST is to test the solvency of the life fund under
various scenarios according to prescribed statutory valuation basis, simulating drastic changes in major parameters such as
new business volume, investment environment, expense patterns, mortality/morbidity patterns and lapse rates.
TABLE 35(A): The table below sets out the concentration of the life insurance risk as at the balance sheet date, net of
reinsurance:
Life Assurance
As at 31 December 2012 As at 31 December 2011
in Singapore Dollars (millions) Insurance liabilities Insurance liabilities
(i) by Class of business:
Whole life 23,526.6 21,271.2
Endowment 14,900.5 15,243.9
Term 383.2 347.9
Accident and health 1,087.7 962.5
Annuity 648.0 644.0
Others 938.0 820.2
Total 41,484.0 39,289.7
(ii) by Country:
Singapore 25,779.6 24,523.6
Malaysia 15,399.8 14,449.8
Others 304.6 316.3
Total 41,484.0 39,289.7
NOTES TO THEFINANCIAL STATEMENTS
168 ANNUAL REPORT 2012 [ MORE TO LIFE ]
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Insurance Risk (continued)
The sensitivity analysis below shows the impact of change in key parameters on the value of policy liabilities, and hence on
the profit and loss statement and shareholders’ equity.
Sensitivity analysis produced are based on parameters set out as follows:
Change in assumptions
(a) Scenario 1 – Mortality and Major Illness + 25% for all future years
(b) Scenario 2 – Mortality and Major Illness - 25% for all future years
(c) Scenario 3 – Health and Disability + 25% for all future years
(d) Scenario 4 – Health and Disability - 25% for all future years
(e) Scenario 5 – Lapse and Surrender rates + 25% for all future years
(f) Scenario 6 – Lapse and Surrender rates - 25% for all future years
(g) Scenario 7 - Expenses + 30% for all future years
TABLE 35(B1): Profit/(Loss) After Tax and Shareholders’ Equity sensitivity for the Singapore segment:
Impact on 1-year’s profit/{loss) after tax and Shareholders’ Equity
in Singapore Dollars
(millions) Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Scenario 6 Scenario 7
2012
Gross impact (74.8) 19.9 71.8 (82.8) 53.9 (67.8) (27.4)
Reinsurance ceded - - - - - - -
Net impact (74.8) 19.9 71.8 (82.8) 53.9 (67.8) (27.4)
2011
Gross impact (58.1) 17.2 70.3 (78.4) 53.7 (67.6) (26.1)
Reinsurance ceded - - - - - - -
Net impact (58.1) 17.2 70.3 (78.4) 53.7 (67.6) (26.1)
TABLE 35(B2): Profit/(Loss) After Tax and Shareholders’ Equity sensitivity for the Malaysia segment:
Impact on 1-year’s profit/(loss) after tax and Shareholders’ Equity
in Singapore Dollars
(millions) Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Scenario 6 Scenario 7
2012
Gross impact (63.6) 55.7 (14.1) 11.6 1.3 (1.2) (7.5)
Reinsurance ceded - - - - - - -
Net impact (63.6) 55.7 (14.1) 11.6 1.3 (1.2) (7.5)
2011
Gross impact (53.6) 54.2 (13.2) 10.7 (0.8) 1.8 (6.1)
Reinsurance ceded - - - - - - -
Net impact (53.6) 54.2 (13.2) 10.7 (0.8) 1.8 (6.1)
NOTES TO THEFINANCIAL STATEMENTS
169GREAT EASTERN HOLDINGS LIMITED
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Insurance Risk (continued)
The above table demonstrates the sensitivity of the Group’s profit and loss after tax to a reasonably possible change in
actuarial valuation assumptions on an individual basis with all other variables held constant.
The effect of sensitivity analysis on reinsurance ceded for the Singapore and Malaysia segments are not material.
The method used and significant assumptions made for deriving sensitivity information above did not change from the
previous year.
Insurance Risk of Non-Life Insurance Contracts
Risks under non-life insurance policies usually cover a twelve-month duration. The risk inherent in non-life insurance contracts
is reflected in the insurance contract liabilities which include the premium and claims liabilities, as set out under Notes 16
and 17 of the financial statements. The premium liabilities comprise reserve for unexpired risks, while the claims liabilities
comprise the loss reserves which include both provision for outstanding claims notified and outstanding claims incurred but
not reported.
TABLE 35(C1): The table below sets out the concentration of the non-life insurance risk as at the balance sheet date:
(i) by Class of business:
Non-life Insurance Contracts
As at 31 December 2012 As at 31 December 2011
in Singapore Dollars
(millions)
Gross
premium
liabilities
Reinsured
premium
liabilities
Net
premium
liabilities
Gross
premium
liabilities
Reinsured
premium
liabilities
Net
premium
liabilities
Fire 21.2 (13.6) 7.6 22.8 (13.1) 9.7
Motor 39.1 (3.1) 36.0 33.2 (5.2) 28.0
Marine & aviation 1.4 (0.8) 0.6 1.6 (1.0) 0.6
Workmen’s compensation 7.9 (2.5) 5.4 5.5 (1.7) 3.8
Personal accident & health 23.1 (2.0) 21.1 23.6 (1.1) 22.5
Miscellaneous 27.6 (17.5) 10.1 25.1 (15.5) 9.6
Total 120.3 (39.5) 80.8 111.8 (37.6) 74.2
in Singapore Dollars
(millions)
Gross
claims
liabilities
Reinsured
claims
liabilities
Net
claims
liabilities
Gross
claims
liabilities
Reinsured
claims
liabilities
Net
claims
liabilities
Fire 23.2 (17.6) 5.6 29.7 (22.9) 6.8
Motor 87.0 (15.2) 71.8 87.2 (12.5) 74.7
Marine & aviation 4.9 (2.7) 2.2 7.3 (5.2) 2.1
Workmen’s compensation 14.1 (4.8) 9.3 10.2 (3.0) 7.2
Personal accident & health 11.7 (1.7) 10.0 10.6 (1.3) 9.3
Miscellaneous 38.5 (21.5) 17.0 37.9 (21.9) 16.0
Total 179.4 (63.5) 115.9 182.9 (66.8) 116.1
NOTES TO THEFINANCIAL STATEMENTS
170 ANNUAL REPORT 2012 [ MORE TO LIFE ]
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Insurance Risk (continued)
TABLE 35(C1): The table below sets out the concentration of the non-life insurance risk as at the balance sheet date:
(continued)
(ii) by Country:
Non-life Insurance Contracts
As at 31 December 2012 As at 31 December 2011
in Singapore Dollars
(millions)
Gross
premium
liabilities
Reinsured
premium
liabilities
Net
premium
liabilities
Gross
premium
liabilities
Reinsured
premium
liabilities
Net
premium
liabilities
Singapore 55.9 (20.0) 35.9 52.5 (20.8) 31.7
Malaysia 64.4 (19.5) 44.9 59.3 (16.8) 42.5
Total 120.3 (39.5) 80.8 111.8 (37.6) 74.2
in Singapore Dollars
(millions)
Gross
claims
liabilities
Reinsured
claims
liabilities
Net
claims
liabilities
Gross
claims
liabilities
Reinsured
claims
liabilities
Net
claims
liabilities
Singapore 61.7 (29.1) 32.6 57.9 (30.1) 27.8
Malaysia 117.7 (34.4) 83.3 125.0 (36.7) 88.3
Total 179.4 (63.5) 115.9 182.9 (66.8) 116.1
Key Assumptions
Non-life insurance contract liabilities are determined based on previous claims experience, existing knowledge of events, the
terms and conditions of the relevant policies and interpretation of circumstances. Of particular relevance is past experience
with similar cases, historical claims development trends, legislative changes, judicial decisions, economic conditions and
claims handling procedures. The estimates of the non-life insurance contract liabilities are therefore sensitive to various
factors and uncertainties. The actual future premium and claims liabilities will not develop exactly as projected and may vary
from initial estimates.
Insurance risk of non-life insurance contracts is mitigated by emphasizing diversification across a large portfolio of insurance
contracts and geographical areas. The variability of risks is improved by careful selection and implementation of underwriting
strategies, which are designed to ensure that risks are diversified in terms of type of risk and level of insured benefits. This is
largely achieved through diversification across industry sectors and geography. Further, strict claim review policies to assess
all new and ongoing claims, regular detailed review of claims handling procedures and frequent investigation of possible
fraudulent claims are all policies and procedures put in place to reduce the risk exposure of the Group. The Group further
enforces a policy of actively managing and prompt pursuing of claims, in order to reduce its exposure to unpredictable future
developments that can negatively impact the Group.
The Group has also limited its exposure by imposing maximum claim amounts on certain contracts as well as the use of
reinsurance arrangements in order to limit exposure to catastrophic events, e.g. hurricanes, earthquakes and flood damages.
NOTES TO THEFINANCIAL STATEMENTS
171GREAT EASTERN HOLDINGS LIMITED
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Insurance Risk (continued)
The sensitivity analysis below shows the impact of changes in key assumptions on gross and net liabilities, profit before tax
and equity.
in Singapore Dollars (millions)
Change in
assumptions
Impact
on gross
liabilities
Impact
on net
liabilities
Impact
on profit
before tax
Impact
on equity
As at 31 December 2012
Provision for adverse deviation
margin +20% 2.8 1.8 (1.8) (1.7)
Loss ratio +20% 107.4 82.4 (82.4) (62.6)
Claim handling expenses +20% 0.4 2.2 (2.2) (1.7)
As at 31 December 2011
Provision for adverse deviation margin +20% 2.4 1.6 (1.0) (1.4)
Loss ratio +20% 115.4 83.0 (83.0) (63.0)
Claim handling expenses +20% 0.4 2.0 (2.0) (1.5)
The method used and significant assumptions made for deriving sensitivity information above did not change from the
previous year.
NOTES TO THEFINANCIAL STATEMENTS
172 ANNUAL REPORT 2012 [ MORE TO LIFE ]
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Insurance Risk (continued)
TABLE 35(C2): The table below shows the cumulative claims estimates, including both claims notified and IBNR for each
successive accident year, at each balance sheet date, together with cumulative payments to date.
Gross non-life insurance contract liabilities for 2012:
in Singapore Dollars (millions) 2005 2006 2007 2008 2009 2010 2011 2012 Total
Estimate of cumulative claims
Accident Year 59.0 49.3 61.2 57.4 74.8 76.5 126.5 117.7
One year later 64.6 51.7 64.5 58.2 80.4 95.7 104.2 -
Two years later 62.7 49.8 59.4 58.3 106.2 92.7 - -
Three years later 61.6 48.8 59.5 83.6 102.7 - - -
Four years later 60.5 48.7 86.7 81.5 - - - -
Five years later 60.2 88.6 85.6 - - - - -
Six years later 92.3 87.1 - - - - - -
Seven years later 91.4 - - - - - - -
Current estimate of cumulative
claims 91.4 87.1 85.6 81.5 102.7 92.7 104.2 117.7
Cumulative payments
Accident Year 20.9 19.6 22.3 23.4 32.1 30.9 40.0 36.4
One year later 49.6 37.7 43.4 45.3 57.3 66.4 73.4 -
Two years later 52.8 42.1 48.8 50.1 85.5 75.5 - -
Three years later 54.3 44.1 50.7 72.9 89.4 - - -
Four years later 55.9 44.6 76.8 74.6 - - - -
Five years later 55.8 83.3 80.3 - - - - -
Six years later 88.0 84.0 - - - - - -
Seven years later 87.9 - - - - - - -
Cumulative payments 87.9 84.0 80.3 74.6 89.4 75.5 73.4 36.4
Non-life gross claim liabilities 3.5 3.1 5.3 6.9 13.3 17.2 30.8 81.3 161.4
Reserve for prior years 16.8
Unallocated surplus 1.2
General Insurance Fund
Contract Liabilities, gross 179.4
NOTES TO THEFINANCIAL STATEMENTS
173GREAT EASTERN HOLDINGS LIMITED
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Insurance Risk (continued)
TABLE 35(C2): The table below shows the cumulative claims estimates, including both claims notified and IBNR for each
successive accident year, at each balance sheet date, together with cumulative payments to date. (continued)
Non-life insurance contract liabilities, net of reinsurance of liabilities, for 2012:
in Singapore Dollars (millions) 2005 2006 2007 2008 2009 2010 2011 2012 Total
Estimate of cumulative claims
Accident Year 26.4 28.9 31.8 36.4 43.2 51.8 83.5 87.5
One year later 26.9 29.2 32.7 37.1 46.8 67.9 66.7 -
Two years later 26.3 28.1 31.5 36.9 67.9 66.0 - -
Three years later 25.8 27.6 31.5 56.5 65.3 - - -
Four years later 25.3 27.3 55.2 53.6 - - - -
Five years later 25.1 61.2 53.4 - - - - -
Six years later 51.4 59.2 - - - - - -
Seven years later 51.4 - - - - - - -
Current estimate of cumulative
claims 51.4 59.2 53.4 53.6 65.3 66.0 66.7 87.5
Cumulative payments
Accident Year 10.8 12.4 13.4 16.6 21.8 24.3 28.3 30.4
One year later 20.1 22.0 24.9 29.3 35.9 50.1 50.3 -
Two years later 22.1 24.0 27.5 31.8 54.3 55.4 - -
Three years later 23.0 25.1 28.4 48.4 57.1 - - -
Four years later 23.5 25.4 49.5 49.3 - - - -
Five years later 23.7 56.7 50.0 - - - - -
Six years later 49.5 57.2 - - - - - -
Seven years later 49.8 - - - - - - -
Cumulative payments 49.8 57.2 50.0 49.3 57.1 55.4 50.3 30.4
Non-life net claim liabilities 1.6 2.0 3.4 4.3 8.2 10.6 16.4 57.1 103.6
Reserve for prior years 11.1
Unallocated surplus 1.2
General Insurance Fund
Contract Liabilities, net 115.9
NOTES TO THEFINANCIAL STATEMENTS
174 ANNUAL REPORT 2012 [ MORE TO LIFE ]
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Market and Credit Risk
Market risk arises when the market values of assets and liabilities do not move consistently as financial markets change.
Changes in interest rates, foreign exchange rates, equity prices and alternative investment prices can impact present and
future earnings of the insurance operations as well as shareholders’ equity.
The Group is exposed to market risk in the investments of the Shareholders’ Fund as well as in the mismatch risk between
the assets and liabilities of the Insurance Funds. In the case of the funds managed by Lion Global Investors, investment
risks are borne by investors and the Group does not assume any liability in the event of occurrence of loss or write-down in
market valuation.
Group ALC and local ALCs actively manage market risks through setting of investment policy and asset allocation, approving
portfolio construction and risk measurement methodologies, approving hedging and alternative risk transfer strategies.
Investment limits monitoring is in place at various levels to ensure that all investment activities are aligned with the Group’s
risk management principles and philosophies. Compliance with established financial risk limits forms an integral part of the
risk governance and financial reporting framework. Management of market risks resulting from changes in interest rates and
currency exchange rates; volatility in equity price; as well as other risks like credit and liquidity risks are briefly described as
follows:
The Group is exposed to interest rate risk through (i) investments in fixed income instruments in both the Shareholders’
Fund as well as the Insurance Funds and (ii) policy liabilities in the Insurance Funds. Since the Shareholders’ Fund
has exposure to investments in fixed income instruments but no exposure to insurance policy liabilities, it will incur
an economic loss when interest rates rise. Given the long duration of policy liabilities and the uncertainty of the cash
flows of the Insurance Funds, it is not possible to hold assets that will perfectly match the policy liabilities. This results
in a net interest rate risk or asset liability mismatch risk which is managed and monitored by Group ALC and the local
ALCs. The Insurance Funds will incur an economic loss when interest rates drop since the duration of policy liabilities
is generally longer than the duration of the fixed income assets.
Under Singapore regulations governed by the Monetary Authority of Singapore (MAS), the liability cash flows with
durations less than 20 years are discounted using zero-coupon spot yield of Singapore Government Securities (SGS)
while liability cash flows with duration more than 20 years for Singapore funds are discounted using the Long Term
Risk Free Discount Rate (“LTRFDR”). As a result, the Singapore Non Participating funds could have negative earnings
impact when the LTRFDR decreases.
In 2009, the Group commenced an exercise to achieve portfolio matching of the assets and liabilities of GEL Non
Participating fund’s long dated liabilities. These long dated liabilities are discounted using the zero-coupon spot yield of
SGS of a matching duration (and not the LTRFDR mentioned above). The long dated liabilities which do not fall within
the matching program will still be subject to the LTRFDR requirement.
Under Malaysia regulations governed by Bank Negara Malaysia (BNM), the liability cash flows with durations less
than 15 years are discounted using zero-coupon spot yield of Malaysia Government Securities (MGS) with matching
duration while the liability cash flows with durations of 15 years or more are discounted using zero-coupon spot yield
of MGS with 15 years term to maturity. As a result, the Malaysia non-participating fund could have negative earnings
impact when the zero-coupon spot yield of MGS decreases.
NOTES TO THEFINANCIAL STATEMENTS
175GREAT EASTERN HOLDINGS LIMITED
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Market and Credit Risk (continued)
Hedging through currency forwards and swaps is typically used for the fixed income portfolio. Internal limits on foreign
exchange exposure ranging from 15% to 35% are applied to investments in fixed income portfolios at a fund level.
Currency risk derived from investments in foreign equities is generally not hedged.
The Group is also exposed to foreign exchange movement on net investment in its foreign subsidiaries. The major
item for the Group is in respect of its Malaysia subsidiaries. The Insurance and Shareholders’ Funds in Malaysia are
predominantly held in Malaysian Ringgit, as prescribed by Bank Negara, Malaysia.
TABLE 35(D): The tables below show the foreign exchange position of the Group’s financial assets and liabilities by
major currencies:
in Singapore Dollars (millions) SGD RM USD Others Total
As at 31 December 2012
FINANCIAL ASSETS
Available-for-sale securities
Equity securities 1,710.7 3,967.6 870.4 2,997.4 9,546.1
Debt securities 10,433.0 13,951.0 5,231.7 198.7 29,814.4
Other investments 434.6 168.3 717.2 235.9 1,556.0
Securities at fair value through
profit or loss
Equity securities 249.7 839.5 148.0 914.1 2,151.3
Debt securities 26.8 337.9 277.0 182.0 823.7
Other investments 608.6 71.4 161.6 196.9 1,038.5
Financial instruments with
embedded derivatives 829.3 783.6 115.6 167.2 1,895.7
Derivative financial assets 488.8 0.2 0.7 1.0 490.7
Loans 645.9 438.1 - - 1,084.0
Insurance receivables 941.3 1,619.0 2.8 19.3 2,582.4
Other debtors and interfund
balances 1,366.1 512.2 3.6 20.7 1,902.6
Cash and cash equivalents 2,812.2 808.9 463.8 127.7 4,212.6
20,547.0 23,497.7 7,992.4 5,060.9 57,098.0
FINANCIAL LIABILITIES
Other creditors and interfund
balances 1,758.7 664.0 5.4 33.4 2,461.5
Insurance payables 841.8 1,935.7 1.8 11.9 2,791.2
Derivative financial liabilities 24.7 - 13.6 3.7 42.0
Provision for agents’ retirement
benefits - 245.2 - - 245.2
Debt issued 399.2 - - - 399.2
General insurance fund contract
liabilities 61.8 117.6 - - 179.4
Life assurance fund contract
liabilities 25,414.9 15,399.8 395.8 273.5 41,484.0
28,501.1 18,362.3 416.6 322.5 47,602.5
NOTES TO THEFINANCIAL STATEMENTS
176 ANNUAL REPORT 2012 [ MORE TO LIFE ]
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Market and Credit Risk (continued)
(continued)
TABLE 35(D): The tables below show the foreign exchange position of the Group’s financial assets and liabilities by
major currencies: (continued)
in Singapore Dollars (millions) SGD RM USD Others Total
As at 31 December 2011
FINANCIAL ASSETS
Available-for-sale securities
Equity securities 2,640.6 3,906.0 1,168.6 2,346.4 10,061.6
Debt securities 7,874.0 11,899.8 3,810.3 438.7 24,022.8
Other investments 331.9 106.3 737.4 232.9 1,408.5
Securities at fair value through profit or
loss
Equity securities 231.8 694.9 180.0 797.6 1,904.3
Debt securities 27.1 228.9 280.2 184.2 720.4
Other investments 636.7 50.2 74.0 181.7 942.6
Financial instruments with embedded
derivatives 724.1 5.5 157.3 205.8 1,092.7
Derivative financial assets 429.0 - 7.7 1.3 438.0
Loans 957.8 244.7 - - 1,202.5
Insurance receivables 938.5 1,597.7 2.6 19.3 2,558.1
Other debtors and interfund balances 1,033.6 457.1 3.1 23.9 1,517.7
Cash and cash equivalents 4,609.8 2,153.1 361.1 124.9 7,248.9
20,434.9 21,344.2 6,782.3 4,556.7 53,118.1
FINANCIAL LIABILITIES
Other creditors and interfund balances 1,678.3 649.1 1.8 35.7 2,364.9
Insurance payables 841.7 1,660.2 2.9 12.7 2,517.5
Derivative financial liabilities 7.3 7.7 33.5 13.6 62.1
Provision for agents’ retirement benefits - 231.0 - 0.3 231.3
Amount due to joint venture - - - 0.1 0.1
Debt issued 399.1 - - - 399.1
General insurance fund contract
liabilities 57.9 125.0 - - 182.9
Life assurance fund contract liabilities 24,320.1 14,449.9 236.7 283.0 39,289.7
27,304.4 17,122.9 274.9 345.4 45,047.6
The Group has no significant concentration of foreign currency risk.
Exposure to equity price risk exists in both assets and liabilities. Asset exposure exists through
direct equity investment, where the Group, through investments in both Shareholders’ Fund and Insurance Funds,
bears all or most of the volatility in returns and investment performance risk. Equity price risk also exists in investment-
linked products where the revenues of the insurance operations are linked to the value of the underlying equity funds
since this has an impact on the level of fees earned. Limits are set for single security holdings as a percentage of equity
holdings.
NOTES TO THEFINANCIAL STATEMENTS
177GREAT EASTERN HOLDINGS LIMITED
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Market and Credit Risk (continued)
Exposure to credit spread risk exists in the Group’s investments in bonds. Credit spread is the
difference between the quoted rates of return of two different investments of different credit quality. When spreads
widen between bonds with different quality ratings, it implies that the market is factoring more risk of default on lower
grade bonds. A widening in credit spreads will result in a fall in the values of the Group’s bond portfolio.
The Group is exposed to alternative investment risk through investments in direct
real estate that it owns in Singapore and Malaysia and through real estate, private equity, infrastructure and hedge
funds for exposures in other countries. A monitoring process is in place to manage foreign exchange, country and
manager concentration risks. This process and the acquisition or divestment of alternative investments are reviewed
and approved by RIC and Group ALC.
The Group does not have a direct or significant exposure to commodity risk.
Cash flow and liquidity risk arises when a company is unable to meet its obligations
associated with financial instruments when required to do so. This typically happens when the investments in the
portfolio are illiquid. Demands for funds can usually be met through ongoing normal operations, premiums received,
sale of assets or borrowings. Unexpected demands for liquidity may be triggered by negative publicity, deterioration
of the economy, reports of problems in other companies in the same or similar lines of business, unanticipated policy
claims, or other unexpected cash demands from policyholders.
Expected liquidity demands are managed through a combination of treasury, investment and asset-liability management
practices, which are monitored on an ongoing basis. Actual and projected cash inflows and outflows are monitored
and a reasonable amount of assets are kept in liquid instruments at all times. The projected cash flows from the in-
force insurance policy contract liabilities consist of renewal premiums, commissions, claims, maturities and surrenders.
Renewal premiums, commissions, claims and maturities are generally stable and predictable. Surrenders can be more
uncertain although it has been quite stable over the past several years.
Unexpected liquidity demands are managed through a combination of product design, diversification limits, investment
strategies and systematic monitoring. The existence of surrender penalty in insurance contracts also protects the
Group from losses due to unexpected surrender trends as well as reduces the sensitivity of surrenders to changes in
interest rates.
NOTES TO THEFINANCIAL STATEMENTS
178 ANNUAL REPORT 2012 [ MORE TO LIFE ]
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Market and Credit Risk (continued)
(continued)
TABLE 35(E1): The following tables show the expected recovery or settlement of financial assets and maturity profile
of the Group’s financial liabilities which are presented based on contractual undiscounted cash flow basis, except
for insurance contract liabilities which are presented based on net cash outflows resulting from recognised liabilities.
in Singapore Dollars (millions)
Carrying
Amount < 1 Year 1 - 5 Years > 5 Years
No maturity
date Total
As at 31 December 2012
FINANCIAL ASSETS
Available-for-sale securities
Equity securities 9,546.1 - - - 9,546.1 9,546.1
Debt securities 29,814.4 2,694.0 9,438.1 27,061.2 - 39,193.3
Other investments 1,556.0 - - - 1,556.0 1,556.0
Securities at fair value
through profit or loss
Equity securities 2,151.3 - - - 2,151.3 2,151.3
Debt securities 823.7 127.9 239.2 754.5 - 1,121.6
Other investments 1,038.5 - - - 1,038.5 1,038.5
Financial instruments with
embedded derivatives 1,895.7 434.0 1,282.5 592.5 11.7 2,320.7
Loans 1,084.0 162.7 986.5 75.7 - 1,224.9
Insurance receivables 2,582.4 264.4 1.0 - 2,317.0 2,582.4
Other debtors and interfund
balances 1,902.6 1,793.8 26.6 38.2 44.0 1,902.6
Cash and cash equivalents 4,212.6 4,212.6 - - - 4,212.6
56,607.3 9,689.4 11,973.9 28,522.1 16,664.6 66,850.0
FINANCIAL LIABILITIES
Other creditors and interfund
balances 2,461.5 2,250.4 175.2 35.9 - 2,461.5
Insurance payables 2,791.2 2,365.2 408.3 1.7 16.0 2,791.2
Provision for agents’
retirement benefits 245.2 63.8 47.4 134.0 - 245.2
Debt issued 399.2 18.4 73.6 464.4 - 556.4
General insurance fund
contract liabilities 179.4 159.1 4.2 - 16.1 179.4
Life assurance fund
contract liabilities 41,484.0 5,674.4 5,721.7 30,087.9 - 41,484.0
47,560.5 10,531.3 6,430.4 30,723.9 32.1 47,717.7
NOTES TO THEFINANCIAL STATEMENTS
179GREAT EASTERN HOLDINGS LIMITED
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Market and Credit Risk (continued)
(continued)
(continued)
TABLE 35(E1): The following tables show the expected recovery or settlement of financial assets and maturity profile
of the Group’s financial liabilities which are presented based on contractual undiscounted cash flow basis, except
for insurance contract liabilities which are presented based on net cash outflows resulting from recognised liabilities.
(continued)
in Singapore Dollars (millions)
Carrying
Amount < 1 Year 1 - 5 Years > 5 Years
No maturity
date Total
As at 31 December 2011
FINANCIAL ASSETS
Available-for-sale securities
Equity securities 10,061.6 - - - 10,061.6 10,061.6
Debt securities 24,022.8 3,850.5 9,192.1 21,736.0 - 34,778.6
Other investments 1,408.5 - - - 1,408.5 1,408.5
Securities at fair value
through profit or loss
Equity securities 1,904.3 - - - 1,904.3 1,904.3
Debt securities 720.4 73.5 275.7 698.3 - 1,047.5
Other investments 942.6 - - - 942.6 942.6
Financial instruments with
embedded derivatives 1,092.7 238.6 1,114.1 329.3 4.7 1,686.7
Loans 1,202.5 367.1 845.1 100.6 - 1,312.8
Insurance receivables 2,558.1 255.4 0.5 - 2,302.2 2,558.1
Other debtors and interfund
balances 1,517.7 1,367.7 120.3 13.1 16.6 1,517.7
Cash and cash equivalents 7,248.9 7,248.9 - - - 7,248.9
52,680.1 13,401.7 11,547.8 22,877.3 16,640.5 64,467.3
FINANCIAL LIABILITIES
Other creditors and interfund
balances 2,364.9 2,074.4 275.8 14.7 - 2,364.9
Insurance payables 2,517.5 2,052.3 458.8 1.8 4.6 2,517.5
Provision for agents’
retirement benefits 231.3 59.9 44.5 126.9 - 231.3
Amount due to joint venture 0.1 0.1 - - - 0.1
Debt issued 399.1 18.4 73.6 482.8 - 574.8
General insurance fund
contract liabilities 182.9 152.6 15.0 0.3 15.0 182.9
Life assurance fund
contract liabilities 39,289.7 6,686.0 6,652.1 25,951.6 - 39,289.7
44,985.5 11,043.7 7,519.8 26,578.1 19.6 45,161.2
NOTES TO THEFINANCIAL STATEMENTS
180 ANNUAL REPORT 2012 [ MORE TO LIFE ]
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Market and Credit Risk (continued)
(continued)
TABLE 35(E2): The following tables show the current/non-current classification of assets and liabilities:
in Singapore Dollars (millions) Current* Non-Current Unit-linked Total
As at 31 December 2012
ASSETS
Cash and cash equivalents 3,766.6 - 446.0 4,212.6
Other debtors and interfund balances 1,222.1 609.6 70.9 1,902.6
Insurance receivables 313.2 2,269.2 - 2,582.4
Loans 140.9 943.1 - 1,084.0
Derivative financial assets 74.6 414.7 1.4 490.7
Investments 6,985.5 35,721.3 4,118.9 46,825.7
Assets held for sale 3.0 - - 3.0
Associates and joint ventures - 322.9 - 322.9
Goodwill - 34.1 - 34.1
Property, plant and equipment - 711.4 - 711.4
Investment properties - 1,531.6 - 1,531.6
12,505.9 42,557.9 4,637.2 59,701.0
LIABILITIES
Insurance payables 2,362.8 409.9 18.5 2,791.2
Other creditors and interfund balances 2,065.1 236.1 160.3 2,461.5
Unexpired risk reserve 120.3 - - 120.3
Derivative financial liabilities 3.7 33.9 4.4 42.0
Income tax 479.9 - 7.9 487.8
Provision for agents’ retirement benefits 63.8 181.4 - 245.2
Deferred tax - 1,057.4 12.5 1,069.9
Debt issued - 399.2 - 399.2
General insurance fund 159.1 27.4 - 186.5
Life assurance fund 1,167.7 41,375.4 4,514.8 47,057.9
6,422.4 43,720.7 4,718.4 54,861.5
* expected recovery or settlement within 12 months from the balance sheet date.
NOTES TO THEFINANCIAL STATEMENTS
181GREAT EASTERN HOLDINGS LIMITED
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Market and Credit Risk (continued)
(continued)
TABLE 35(E2): The following tables show the current/non-current classification of assets and liabilities: (continued)
in Singapore Dollars (millions) Current* Non-Current Unit-linked Total
As at 31 December 2011
ASSETS
Cash and cash equivalents 6,755.8 - 493.1 7,248.9
Other debtors and interfund balances 934.9 541.6 41.2 1,517.7
Insurance receivables 306.3 2,251.8 - 2,558.1
Loans 353.2 849.3 - 1,202.5
Derivative financial assets 99.0 335.8 3.2 438.0
Investments 6,664.6 29,908.5 3,579.8 40,152.9
Assets held for sale 4.4 - - 4.4
Associates and joint ventures - 320.2 - 320.2
Goodwill - 26.1 - 26.1
Property, plant and equipment - 722.0 - 722.0
Investment properties - 1,411.8 - 1,411.8
15,118.2 36,367.1 4,117.3 55,602.6
LIABILITIES
Insurance payables 2,042.5 460.0 15.0 2,517.5
Other creditors and interfund balances 2,128.7 171.7 64.5 2,364.9
Unexpired risk reserve 111.8 - - 111.8
Derivative financial liabilities 24.4 33.5 4.2 62.1
Income tax 412.4 - 5.5 417.9
Provision for agents’ retirement benefits 59.9 171.4 - 231.3
Amount due to joint venture 0.1 - - 0.1
Deferred tax - 937.2 8.7 945.9
Debt issued - 399.1 - 399.1
General insurance fund 152.6 36.1 - 188.7
Life assurance fund 2,605.8 37,733.0 4,082.0 44,420.8
7,538.2 39,942.0 4,179.9 51,660.1
* expected recovery or settlement within 12 months from the balance sheet date.
NOTES TO THEFINANCIAL STATEMENTS
182 ANNUAL REPORT 2012 [ MORE TO LIFE ]
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Market and Credit Risk (continued)
Credit risk is the risk that one party to a financial instrument will cause financial loss to the other party
by failing to discharge an obligation. The Group is mainly exposed to credit risk through (i) investments in cash
and bonds, (ii) corporate lending activities and (iii) exposure to counterparty’s credit in derivative transactions and
reinsurance contracts. For all three types of exposures, financial loss may materialise as a result of a credit default by
the borrower or counterparty. For investments in bonds, financial loss may also materialise as a result of the widening
of credit spreads or a downgrade of credit rating.
The task of evaluating and monitoring credit risk is undertaken by the local ALCs. Group wide credit risk is managed
by Group ALC. The Group has internal limits by issuer or counterparty and by investment grades. These limits are
actively monitored to manage the credit and concentration risk. These limits are reviewed on a regular basis. The
creditworthiness of reinsurers is assessed on an annual basis by reviewing their financial strength through published
credit ratings and other publicly available financial information.
Reinsurance is placed with counterparties that have a good credit rating and concentration of risk is avoided by
following policy guidelines in respect of counterparties’ limits that are set each year.
Credit risk in respect of customer balances incurred on non-payment of premiums or contributions will only persist
during the grace period specified in the policy document or trust deed until expiry, when the policy is either paid up or
terminated.
The Group issues unit-linked investment policies. In the unit-linked business, the policyholder bears the investment
risk on the assets held in the unit-linked funds as the policy benefits are directly linked to the value of the assets in the
fund. Therefore, the Group has no material credit risk on unit-linked financial assets.
The loans in the Group’s portfolio are generally secured by collateral, with a maximum loan to value ratio of 70%
predominantly. The amount and type of collateral required depend on an assessment of the credit risk of the
counterparty. Guidelines are implemented regarding the acceptability of the types of collateral and the valuation
parameters. Management monitors the market value of the collateral, requests additional collateral when needed and
performs an impairment valuation when applicable. The fair value of collateral, held by the Group as lender, for which
it is entitled to sell or pledge in the event of default is as follows:
in Singapore Dollars
(millions) Type of Collateral
Carrying Amount
of Loans
Fair Value
of Collateral
As at 31 December 2012
Secured loans Properties 1,081.3 2,624.9
Others 1.9 1.3
Policy loans Cash value of policies 2,268.2 4,443.4
3,351.4 7,069.6
As at 31 December 2011
Secured loans Properties 1,200.7 3,160.4
Others 1.1 1.0
Policy loans Cash value of policies 2,251.3 4,352.1
3,453.1 7,513.5
NOTES TO THEFINANCIAL STATEMENTS
183GREAT EASTERN HOLDINGS LIMITED
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Market and Credit Risk (continued)
(continued)
There were no investments lent and collateral received under securities lending arrangements as at 31 December 2012
(31 December 2011: nil).
As at the balance sheet date, no investments (2011: nil) were placed as collateral for currency hedging purposes.
Transactions are conducted under terms and conditions that are usual and customary for standard securities borrowing
and lending activities.
The tables below show the maximum exposure to credit risk for the components of the balance sheet. The maximum
exposure is shown gross, before the effect of mitigation through the use of master netting or collateral agreements
and the use of credit derivatives. For derivatives, the fair value shown on the balance sheet represents the current
risk exposure but not the maximum risk exposure that could arise in the future as a result of the change in value. The
tables also provide information regarding the credit risk exposure of the Group by classifying assets according to the
Group’s credit ratings of counterparties.
Neither past-due nor impaired
in Singapore Dollars (millions)
Investment
Grade*
(BBB to
AAA)
Non
Investment
Grade*
(C to BB) Not Rated Unit-linked
Not
subject
to credit
risk Past due** Total
As at 31 December 2012
Available-for-sale
securities
Equity securities - - - - 9,546.1 - 9,546.1
Debt securities 26,157.8 192.6 3,464.0 - - - 29,814.4
Other investments - - - - 1,556.0 - 1,556.0
Securities at fair value
through profit or loss
Equity securities - - - 2,151.3 - - 2,151.3
Debt securities - - 2.2 821.5 - - 823.7
Other investments - - - 1,038.5 - - 1,038.5
Financial instruments with
embedded derivatives 685.0 2.4 1,099.2 107.6 1.5 - 1,895.7
Derivative financial assets 488.8 - 0.5 1.4 - - 490.7
Loans - - 1,084.0 - - - 1,084.0
Insurance receivables 0.9 - 2,547.1 - - 34.4 2,582.4
Other debtors and
interfund balances - - 1,831.1 70.9 - 0.6 1,902.6
Cash and cash
equivalents 3,584.7 - 182.1 445.8 - - 4,212.6
30,917.2 195.0 10,210.2 4,637.0 11,103.6 35.0 57,098.0
NOTES TO THEFINANCIAL STATEMENTS
184 ANNUAL REPORT 2012 [ MORE TO LIFE ]
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Market and Credit Risk (continued)
(continued)
Neither past-due nor impaired
in Singapore Dollars (millions)
Investment
Grade*
(BBB to
AAA)
Non
Investment
Grade*
(C to BB) Not Rated Unit-linked
Not
subject
to credit
risk Past due** Total
As at 31 December 2011
Available-for-sale securities
Equity securities - - - - 10,061.6 - 10,061.6
Debt securities 21,754.0 204.3 2,064.5 - - - 24,022.8
Other investments - - - - 1,408.5 - 1,408.5
Securities at fair value
through profit or loss
Equity securities - - - 1,904.3 - - 1,904.3
Debt securities - - 1.6 718.8 - - 720.4
Other investments - - - 942.6 - - 942.6
Financial instruments with
embedded derivatives 221.1 14.0 801.8 11.3 44.5 - 1,092.7
Derivative financial assets 434.7 - 0.1 3.2 - - 438.0
Loans - - 1,202.5 - - - 1,202.5
Insurance receivables 0.8 - 2,531.1 - - 26.2 2,558.1
Other debtors and
interfund balances - - 1,474.9 40.1 - 2.7 1,517.7
Cash and cash equivalents 6,586.8 - 169.1 493.0 - - 7,248.9
28,997.4 218.3 8,245.6 4,113.3 11,514.6 28.9 53,118.1
NOTES TO THEFINANCIAL STATEMENTS
185GREAT EASTERN HOLDINGS LIMITED
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Market and Credit Risk (continued)
(continued)
Aging analysis of financial assets past due:
Past due but not impaired
in Singapore Dollars
(millions) < 6 months
6 months to
12 months > 12 months Total
Past due and
impaired Total
As at 31 December 2012
Insurance receivables 27.3 6.4 0.7 34.4 8.2 42.6
Other debtors and interfund
balances 0.4 - 0.2 0.6 0.1 0.7
27.7 6.4 0.9 35.0 8.3 43.3
As at 31 December 2011
Insurance receivables 23.4 2.6 0.2 26.2 13.2 39.4
Other debtors and interfund
balances 2.4 0.1 0.2 2.7 - 2.7
25.8 2.7 0.4 28.9 13.2 42.1
For assets to be classified as “past due and impaired”, contractual payments must be in arrears for more than 90 days.
These receivables are not secured by any collateral or credit enhancements.
An important element of managing both market and credit risks is to actively manage
concentration to specific issuers, counterparties, industry sectors, countries and currencies. Both internal and
regulatory limits are put in place and monitored to manage concentration risk. These limits are reviewed on a regular
basis by the respective management committees. The Group’s exposures are within the concentration limits set by the
respective local regulators.
The Group actively manages its product mix to ensure that there is no significant concentration of credit risk.
The analysis below is performed for reasonably possible movements in key
variables with all other variables constant. The correlation of variables will have a significant effect in determining the
ultimate fair value and/or amortised cost of financial assets, but to demonstrate the impact due to changes in variables,
variables have to be changed on an individual basis. It should be noted that the movements in these variables are non-
linear.
The impact on net profit after tax represents the effect caused by changes in fair value of financial assets whose fair
values are recorded in the Profit and Loss Statement, and changes in valuation of insurance contract liabilities. The
impact on equity represents the impact on net profit after tax and the effect on changes in fair value of financial assets
held in Shareholders’ Funds.
NOTES TO THEFINANCIAL STATEMENTS
186 ANNUAL REPORT 2012 [ MORE TO LIFE ]
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Market and Credit Risk (continued)
(continued)
Market risk sensitivity analysis:
Impact on Profit After Tax Impact on Equity
in Singapore Dollars (millions)
31 December
2012
31 December
2011
31 December
2012
31 December
2011
Change in variables:
(a) Interest Rate
+ 100 basis points (156.9) (77.7) (255.6) (121.2)
- 100 basis points (2.7) (45.0) 73.4 (13.0)
(b) LTRFDR(1)
+ 10 basis points 16.9 16.0 16.9 16.0
- 10 basis points (17.5) (16.7) (17.5) (16.7)
(c) Foreign Currency
5% increase in market value of foreign
currency denominated assets 13.3 12.3 51.2 45.3
5% decrease in market value of
foreign currency denominated assets (13.3) (12.3) (51.2) (45.3)
(d) Equity
20% increase in market indices:
- STI 14.6 1.3 34.9 93.1
- KLCI 0.4 0.4 16.9 13.8
20% decrease in market indices:
- STI (14.6) (1.3) (34.9) (93.1)
- KLCI (0.4) (0.4) (16.9) (13.8)
(e) Credit
Spread + 100 basis points (263.1) (197.2) (312.7) (227.2)
Spread - 100 basis points 263.1 197.2 312.7 227.2
(f) Alternative Investments(2)
10% increase in market value of all
alternative investments 15.9 17.8 22.5 21.8
10% decrease in market value of all
alternative investments (15.9) (17.8) (22.5) (21.8)
Singapore.
(2) Alternative Investments comprise investments in real estate, private equity, infrastructure and hedge funds.
The method for deriving sensitivity information and significant variables did not change from the previous year.
NOTES TO THEFINANCIAL STATEMENTS
187GREAT EASTERN HOLDINGS LIMITED
35 ENTERPRISE RISK GOVERNANCE AND MANAGEMENT OBJECTIVES AND POLICIES (continued)
Market and Credit Risk (continued)
(continued)
Operational and Compliance Risk
Operational risk is an event or action that may potentially impact partly or completely the achievement of the organisation’s
objectives resulting from inadequate or failed internal processes and systems, human factors, or external events.
Compliance risk is any event or action that may potentially impact partly or completely the achievement of the
organisation’s objectives, via legal or regulatory sanctions or financial losses, as a result of its failure to comply with
applicable laws, regulations, rules and standards, which are defined as:
- laws, regulations and rules governing insurance business and financial activities undertaken by Great Eastern
- codes of practice promoted by industry associations
- internal standards and guidelines.
The day-to-day management of operational and compliance risk is through the maintenance of comprehensive internal
controls, supported by an infrastructure of systems and procedures to monitor processes and transactions. GMT
reviews operational and compliance issues on a group basis at its monthly meetings while local level issues are
managed and monitored by the local SMTs. The Internal Audit team reviews the systems of internal controls to assess
their ongoing relevance and effectiveness, and reports at least quarterly to the Audit Committee.
NOTES TO THEFINANCIAL STATEMENTS
188 ANNUAL REPORT 2012 [ MORE TO LIFE ]
36 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
36.1 The following table shows an analysis of financial instruments that are carried at fair value by level of fair value
hierarchy:
in Singapore Dollars (millions)
Level 1 -
Quoted
market price
Level 2 -
Valuation
techniques -
market
observable
inputs
Level 3 -
Valuation
techniques -
unobservable
inputs
Total
fair value
As at 31 December 2012
FINANCIAL ASSETS
Derivative financial assets
Foreign exchange
Forwards - 23.7 - 23.7
Currency swaps - 320.6 - 320.6
Interest rates
Swaps - 146.1 - 146.1
Exchange traded futures - 0.2 - 0.2
Equity
Options - 0.1 - 0.1
- 490.7 - 490.7
Available-for-sale financial assets
Equity securities
Quoted equity securities 8,933.3 - - 8,933.3
Unquoted equity securities - 612.8 - 612.8
Debt securities
Quoted debt securities 17,097.3 73.7 - 17,171.0
Unquoted debt securities - 12,643.4 - 12,643.4
Other investments
Collective investment schemes 875.1 680.9 - 1,556.0
26,905.7 14,010.8 - 40,916.5
Financial assets designated at fair value
through profit or loss
Equity securities
Quoted equity securities 2,151.3 - - 2,151.3
Debt securities
Quoted debt securities 386.0 2.1 - 388.1
Unquoted debt securities - 435.6 - 435.6
Other investments
Collective investment schemes 1,038.4 0.1 - 1,038.5
3,575.7 437.8 - 4,013.5
Financial assets held-for-trading
Financial instruments with embedded derivatives 880.6 900.7 114.4 1,895.7
31,362.0 15,840.0 114.4 47,316.4
FINANCIAL LIABILITIES
Derivative financial liabilities
Foreign exchange
Forwards - 8.4 - 8.4
Currency swaps - 32.7 - 32.7
Interest rates
Swaps - 0.8 - 0.8
Exchange traded futures - 0.1 - 0.1
- 42.0 - 42.0
NOTES TO THEFINANCIAL STATEMENTS
189GREAT EASTERN HOLDINGS LIMITED
36 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (continued)
36.1 The following table shows an analysis of financial instruments that are carried at fair value by level of fair value
hierarchy: (continued)
in Singapore Dollars (millions)
Level 1 -
Quoted
market price
Level 2 -
Valuation
techniques -
market
observable
inputs
Level 3 -
Valuation
techniques -
unobservable
inputs
Total
fair value
As at 31 December 2011
FINANCIAL ASSETS
Derivative financial assets
Foreign exchange
Forwards - 16.1 - 16.1
Currency swaps - 311.6 - 311.6
Interest rates
Swaps - 109.4 - 109.4
Exchange traded futures - 0.8 - 0.8
Equity
Options - 0.1 - 0.1
- 438.0 - 438.0
Available-for-sale financial assets
Equity securities
Quoted equity securities 9,393.8 - - 9,393.8
Unquoted equity securities - 667.8 - 667.8
Debt securities
Quoted debt securities 13,111.3 76.8 - 13,188.1
Unquoted debt securities - 10,834.7 - 10,834.7
Other investments
Collective investment schemes 696.1 712.4 - 1,408.5
23,201.2 12,291.7 - 35,492.9
Financial assets designated at fair value through profit or loss
Equity securities
Quoted equity securities 1,904.3 - - 1,904.3
Debt securities
Quoted debt securities 337.9 5.8 - 343.7
Unquoted debt securities - 376.7 - 376.7
Other investments
Collective investment schemes 942.6 - - 942.6
3,184.8 382.5 - 3,567.3
Financial assets held-for-trading
Financial instruments with embedded derivatives 888.2 138.8 65.7 1,092.7
27,274.2 13,251.0 65.7 40,590.9
FINANCIAL LIABILITIES
Derivative financial liabilities
Foreign exchange
Forwards - 31.0 - 31.0
Currency swaps - 24.4 - 24.4
Interest rates
Swaps - 6.7 - 6.7
- 62.1 - 62.1
Comparatives have been restated to conform to current year’s presentation.
NOTES TO THEFINANCIAL STATEMENTS
190 ANNUAL REPORT 2012 [ MORE TO LIFE ]
36 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (continued)
Fair Value Hierarchy
The Group classifies fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in
making the measurements. The fair value hierarchy has the following levels:
Level 1 assets are for those which market values are determined in whole or in part by reference to published quotes in
an active market. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent
actual and regularly occurring market transactions on an arm’s length basis.
Level 2 assets are for those which market values are measured using a valuation technique based on assumptions that are
supported by prices from observable current market transactions. These type of assets includes assets for which pricing is
obtained via pricing services but where prices have not been determined in an active market, financial assets with fair values
based on broker quotes, investments in private equity funds with fair values obtained from counterparties and assets that
are valued using the Group’s own models whereby the majority of assumptions are market observable.
Level 3 assets are for those which market values are measured using a valuation technique based on assumptions formed
from unobservable inputs. Unobservable inputs are inputs not supported by market data, but which are set on the basis that
they represent what is reasonable given prevailing market conditions.
During the year, the Group refined the disclosure approach in determining the Fair Value Hierarchy classification for quoted
corporate bonds. As a result of this assessment, some of the quoted corporate bonds amounting to $7,360.6m as at 31
December 2011 were reclassified from Level 2 to Level 1.
Movements in Level 3 financial instruments measured at fair value
The following table presents the reconciliation for all financial instruments measured at fair value based on significant
unobservable inputs (Level 3):
Group
As at 31 December 2012 As at 31 December 2011
Financial assets
held-for-trading
Financial assets
held-for-trading
in Singapore Dollars (millions)
Financial
Instruments
with Embedded
Derivatives Total
Financial
Instruments
with Embedded
Derivatives Total
Opening balance 65.7 65.7 90.0 90.0
Total gains or losses:
- in profit or loss (1) 48.7 48.7 (24.3) (24.3)
Closing balance 114.4 114.4 65.7 65.7
Total gains or losses for the year included in profit
or loss (1) for assets held at 31 December 48.7 48.7 (24.3) (24.3)
(1) Included in “Gain on sale of investments and changes in fair value”.
There have been no transfers from Level 1 and Level 2 to Level 3 during the financial years ended 31 December 2012
and 2011.
NOTES TO THEFINANCIAL STATEMENTS
191GREAT EASTERN HOLDINGS LIMITED
36 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (continued)
Impact of changes to key assumptions on fair value of Level 3 financial instruments
The following table shows the impact on fair value of Level 3 financial instruments by using reasonably possible alternative
assumptions. The positive and negative effects are approximately the same.
Group
As at 31 December 2012
Effect of reasonably
possible alternative
assumptions
in Singapore Dollars (millions)
Carrying
amount
Profit
or loss
Financial assets held-for-trading
Financial instruments with embedded derivatives 114.4 1.4
Group
As at 31 December 2011
Effect of reasonably possible
alternative assumptions
in Singapore Dollars (millions)
Carrying
amount
Profit
or loss
Financial assets held-for-trading
Financial instruments with embedded derivatives 65.7 (2.6)
For financial instruments with embedded derivatives, the fair value has been determined using a valuation model where the
correlation of default relationships among reference entities is a key assumption but not supportable by observable market
data. The Group adjusted the assumptions by 20% (2011: 20%) from management’s estimates, which is considered by the
Group to be a reasonably possible but conservative alternative based on prevailing market conditions.
36.2 The carrying amounts of the Group’s and the Company’s financial assets and liabilities approximate their fair value,
either due to their short-term nature or because they are floating rate instruments that are re-priced to market interest
rates on or near the balance sheet date, except as disclosed below:
Group Company
in Singapore Dollars
(millions)
31 Dec 2012 31 Dec 2011 31 Dec 2012 31 Dec 2011
Carrying
amount
Fair
Value
Carrying
amount
Fair
Value
Carrying
amount
Fair
Value
Carrying
amount
Fair
Value
Financial assets
Available-for-sale
financial assets
Unquoted equity
securities 51.8 # 50.4 # - - - -
Financial liabilities
Debt issued 399.2 426.3 399.1 416.5 - - - -
NOTES TO THEFINANCIAL STATEMENTS
192 ANNUAL REPORT 2012 [ MORE TO LIFE ]
36 FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (continued)
# Unquoted equity securities
It is not practicable to determine the fair values of the above unquoted equity investments because of the lack of unquoted
market prices and the assumptions used in the valuation models to value these investments cannot be reasonably determined.
However, the cash flows from these investments are expected to be in excess of their carrying amounts.
The Group does not intend to dispose of these investments in the foreseeable future. The Group intends to eventually
dispose of these investments through sale to institutional investors.
Debt issued
Fair value is determined directly by reference to their published market bid price at the end of the reporting period.
37 DIVIDENDS
Group and Company
in Singapore Dollars (millions) 2012 2011
Final tax exempt (one-tier) dividend for the previous year of 27
cents per ordinary share (2011: nil) 127.8 -
Interim tax exempt (one-tier) dividend for the previous year of 10
cents per ordinary share (2011: 10 cents per ordinary share) 47.3 47.3
175.1 47.3
The Directors proposed that a final tax exempt (one-tier) dividend of 27 cents per ordinary share and a special tax exempt
(one-tier) dividend of 27 cents per ordinary share, totalling 54 cents per ordinary share amounting to $255.6 million (2011:
$127.8 million) be paid in respect of the financial year ended 31 December 2012. These have not been recognised as
distributions to shareholders.
There are no income tax consequences attached to the dividend to the shareholders proposed by the Company but not
recognised as a liability in the financial statements.
38 AUTHORISATION OF FINANCIAL STATEMENTS
At the Board of Directors’ Meeting held on 7 February 2013, the Board authorised these financial statements for issue and
that two Directors of the Board, Mrs Fang Ai Lian and Mr Christopher Wei, sign the Directors’ Report on behalf of the Board.
NOTES TO THEFINANCIAL STATEMENTS
193GREAT EASTERN HOLDINGS LIMITED
SINGAPORE PROPERTIES - 100% HELD BY THE GREAT EASTERN LIFE ASSURANCE COMPANY LIMITED:
Location Tenure
Site Area
(sq m)
Gross Floor Area
(sq m) Purpose
Great Eastern Centre 99 years leasehold 6,600 21,515 Commercial - Offices
1 Pickering Street (Expiry date: 31 August
2096)
(strata area
excluding voids)
Orchard Gateway @ Emerald Freehold 1,444 - Commercial - Retail & Offices
216 & 218 Orchard Road Under redevelopment
Estimated completion : 2013
Great Eastern @ Changi Freehold 3,503 10,891 Commercial - Offices
200 Changi Road
Great Eastern House 999 years leasehold 730 3,334 Commercial - Offices
49 Beach Road (Expiry date: 29 January
2834)
Holland GEMS
1, 3 & 5 Taman Nakhoda
Freehold 8,685 13,895 Residential - 64-unit
condominium
Gallop Court
6, 6A, 6B Gallop Road
Freehold 8,225 5,565 Residential - 25-unit
condominium
Gallop Gardens
1, 1A, 1B, 1C, 3, 3A, 3B, 3C
Tyersall Road
Freehold 12,636 4,805 Residential - 8-unit-Good Class
Bungalows
Newton GEMS
50, 52 & 54 Newton Road
Lot 660 TS 28, Newton Road Freehold 2,809
and 28,819 Residential - 190-unit condominium
Lot 56 TS 28, Lincoln Road 999 years leasehold 6,945
(Expiry date: 12 February
2884)
3 Pickering Street 99 years leasehold 7,086 15,004 Commercial - Retail & Offices
(Expiry date: 31 August
2096)
(strata area
excluding voids)
65-unit shop houses
MALAYSIA PROPERTIES - 100% HELD BY GREAT EASTERN LIFE ASSURANCE (MALAYSIA) BERHAD:
Menara Great Eastern / Freehold 25,600 149,464 Commercial - Retail and Offices
Great Eastern Mall
303 Jalan Ampang
Kuala Lumpur
40, 44, 50 & 68 Jln Ampang Freehold 2,880 10,673 Commercial - Offices
Kuala Lumpur
LIST OFMAJOR PROPERTIES
194 ANNUAL REPORT 2012 [ MORE TO LIFE ]
MALAYSIA PROPERTIES - 100% HELD BY GREAT EASTERN LIFE ASSURANCE (MALAYSIA) BERHAD: (continued)
Location Tenure
Site Area
(sq m)
Gross Floor Area
(sq m) Purpose
Seri Hening Residence Freehold 21,484 53,111 Residential - Condominiums
28, Jln Ampang Hilir,
K.Lumpur
Shell Garden, Port Dickson Freehold 16,349 - Residential land
Negeri Sembilan
65 Jalan Gaya, 99 years leasehold 718 8,853 Commercial - Offices
Kota Kinabalu, Sabah (Expiry date: 31
December 2093)
25, Light Street, Penang Freehold 4,842 14,629 Commercial - Offices
No. 103, 105, 107 & 109
Jalan Yam Tuan, Seremban
Negeri Sembilan
Freehold 980 5,821 Commercial - 5-storey Retail &
Offices
Lot Q169-Q173 Plz Mahkota
Melaka
99 years leasehold
(Expiry date: 18 July
2101)
531 2,127 Commercial - 4-storey Retail &
Offices
25 Jalan Dato Lim Hoe Lek 99 years leasehold 507 1,525 Commercial -3-storey Shop Office
Kuantan (Expiry date: 2 September
2093)
Menara Weld / The Weld Freehold 6,404 75,126 Commercial - 30-storey building
with a 4 levels basement, 5 levels
of shopping & 26 floors of office.
76 Jln Raja Chulan, Kuala
Lumpur
113, Jalan Tun Haji Openg,
Kuching, Sarawak
837 years leasehold
(Expiry date: 31
December 2774)
3,359 335 Residential - 1 storey detached
house
Nos. 10a to 10i, Jln Brooks
Drive Sibu, Sarawak
Leasehold
(Expiry date: 31
December 2923)
1,015 3,850 9 units of 4-storey shophouses
Lot 48, 49, 50 & 51 99 years leasehold strata title 3,095 4 units of 4-storey shopoffices
Greentown Avenue, Ipoh (Title pending)
Lot 72342 Freehold 4,490 - Vacant commercial land
Mutiara Damansara
52 & 54 Jalan Ampang Freehold 1,209 3,268 Commercial - Offices
Kuala Lumpur
LIST OFMAJOR PROPERTIES
195GREAT EASTERN HOLDINGS LIMITED
MALAYSIA PROPERTIES - 100% HELD BY OVERSEAS ASSURANCE CORPORATION (MALAYSIA) BERHAD:
Location Tenure
Site Area
(sq m)
Gross Floor Area
(sq m) Purpose
Nos 17 - 21 Freehold 613 2,973 Commercial - Offices
Jalan Medan Tuanku Satu
Medan Tuanku
50300 Kuala Lumpur
No 1, Jalan 6/7, 99 years leasehold 823 - Residential
46000, Petaling Jaya (Expiry date: 25 July
2054 )
INDONESIA PROPERTIES - 100% HELD BY P.T. GREAT EASTERN LIFE INDONESIA:
Menara Karya Building Freehold 6,109 1,318 Commercial - Offices
Jl.HR.Rasuna Said Blok X-5,
Kav. 1-2
Setiabudi Kuningan,
Jakarta Selatan 12950
LIST OFMAJOR PROPERTIES
196 ANNUAL REPORT 2012 [ MORE TO LIFE ]
SHAREHOLDINGSTATISTICS
Total Number of Issued Shares : 473,319,069 shares
Class of Shares : Ordinary shares
Voting Rights : The Articles of Association provide for:
(a) on a show of hands: 1 vote
(b) on a poll: 1 vote for each ordinary share held
DISTRIBUTION OF SHAREHOLDINGS
No. of No. of
Size of Holdings Shareholders % Shares %
1 – 999 65 3.38 16,297 0.00
1,000 – 10,000 1,572 81.70 3,961,043 0.84
10,001 – 1,000,000 276 14.35 20,371,008 4.30
1,000,001 and above 11 0.57 448,970,721 94.86
Total 1,924 100.00 473,319,069 100.00
TWENTY LARGEST SHAREHOLDERS (ACCORDING TO THE REGISTER OF MEMBERS)
Shareholders (Members) No. of Shares %
1 Oversea-Chinese Bank Nominees Private Limited 403,170,489 85.18
2 HSBC (Singapore) Nominees Private Limited 10,558,995 2.23
3 Eastern Realty Company Limited 9,425,619 1.99
4 Citibank Nominees Singapore Private Limited 6,578,052 1.39
5 DBS Nominees (Private) Limited 5,997,978 1.27
6 Wong Hong Sun 3,178,000 0.67
7 Wong Hong Yen 3,051,668 0.64
8 Kuchai Development Berhad 3,032,000 0.64
9 Sungei Bagan Rubber Company (Malaya) Berhad 1,733,120 0.37
10 Shaw Vee Meng 1,208,000 0.26
11 Shaw Vee Foong 1,036,800 0.22
12 DBSN Services Private Limited 773,000 0.16
13 Lee Hak Heng 728,150 0.15
14 United Overseas Bank Nominees (Private) Limited 577,620 0.12
15 Lee Seok Chee 560,480 0.12
16 Yeap Holdings (Private) Limited 487,238 0.10
17 The Estate of Alan Loke (Deceased) 455,094 0.10
18 Yeo Kok Seng 454,000 0.10
19 The Bank of East Asia (Nominees) Private Limited 437,000 0.09
20 Mrs Svasti Nellie Nee Wong Nellie or Svasti Daniel Y K P 415,880 0.09
Total 453,859,183 95.89
197GREAT EASTERN HOLDINGS LIMITED
SHAREHOLDINGSTATISTICS
SUBSTANTIAL SHAREHOLDER
(ACCORDING TO THE REGISTER OF SUBSTANTIAL SHAREHOLDERS AS AT 4 MARCH 2013)
DIRECT DEEMED
INTEREST INTEREST TOTAL INTEREST
No. of No. of No. of Percentage of
Shares Shares Shares issued shares
Oversea-Chinese Banking
Corporation Limited (“OCBC Bank”) 402,521,889(1) 10,059,219(2) 412,581,108 87.17
Notes:
(1) Shares registered in the name of Oversea-Chinese Bank Nominees Private Limited
(2) OCBC Bank is deemed to have an interest in 10,059,219 shares held by the following:
Name of Company No. of Shares
Eastern Realty Company Limited 9,425,619
Singapore Building Corporation Limited (shares registered in the name of Oversea-Chinese Bank
Nominees Private Limited) 633,600
Total deemed interest 10,059,219
Based on information available to the Company as at 4 March 2013, approximately 13% of the issued ordinary shares of the
Company is held by the public, and therefore Rule 723 of the Listing Manual of Singapore Exchange Securities Trading Limited has
been complied with.
198 ANNUAL REPORT 2012 [ MORE TO LIFE ]
MANAGEMENTTEAM
GROUP
Great Eastern Holdings Limited
Christopher Wei
Group Chief Executive Officer
Tony Cheong
Group Chief Financial Officer
Andrew Lee
Group Chief Marketing & Distribution
Officer
Khoo Kah Siang (Dr)
Chief Executive Officer, Singapore
Dato Koh Yaw Hui
Chief Executive Officer, Malaysia
Yoon Mun Thim
Group Chief Investment Officer
Ho Ming Heng
Managing Director,
Group Operations & IT
Chin Wee Cheak
Head, Group Audit
Jennifer Wong Pakshong
Group Company Secretary
and General Counsel
Ronnie Tan
Head, Group Risk Management
Loo Boon Teik
Group Actuary
David Chiang Boon Kong
Managing Director,
Group Human Capital
SINGAPORE
The Great Eastern Life Assurance
Company Limited
The Overseas Assurance
Corporation Limited
Khoo Kah Siang (Dr)
Chief Executive Officer
Koo Chung Chang
Chief Financial Officer
Ben Tan
Chief Distribution Officer
Colin Chan
Chief Marketing Officer
Lee Swee Kiang
Chief Product Officer
Leow Yung Khee (Dr)
Head, General & Group Insurance,
and Claims
Jesslyn Tan
Chief Executive Officer,
Great Eastern Financial Advisers
Jerry Ng
Head, Life Bancassurance
Patrick Kok
Head, Operations
Koh Peck Hoon
Head, Human Capital
Tan Seck Geok
Head, Corporate Communications
Cheung Kwok Kei
Appointed Actuary & Head of Actuarial
Teh Kor Lak
Chief Information Officer
Ronnie Tan
Head, Risk Management & Compliance
Joys Wiraatmadja
Chief Internal Auditor
Tan Mui Jun
Head, Investment Management
Wendy Anne Teo
Senior Legal Counsel
MALAYSIA
Great Eastern Life Assurance
(Malaysia) Berhad
Dato Koh Yaw Hui
Chief Executive Officer
Raymond Ong Eng Siew
Chief Financial Officer
Richard Lin Kwok Wing
Chief Investment Officer
Song Hock Wan
Chief Distribution Officer
Nicholas Kua Choo Ming
Chief Marketing Officer
Jeffrey Yem Voon Cheat
Chief Operations Officer
Chan Chee Wei
Head, Bancassurance
Yap Chee Keong
Appointed Actuary
199GREAT EASTERN HOLDINGS LIMITED
MANAGEMENTTEAM
Cheong Soo Ching
Head, Risk Management & Compliance
Vincent Chin Kok Lean
Head, Information Technology
Liza Hanim Binti Zainal Abidin
Company Secretary
Datin Nancy Lim
Head, Human Capital
Audra Chung Kit Li
Chief Internal Auditor
Bruce Lee Yee Lam
Head, Property & Corporate Services
Overseas Assurance Corporation
(Malaysia) Berhad
Ng Kok Kheng
Chief Executive Officer
Lee Pooi Hor
Chief Operations Officer
Kevin Choong Wui Teck
Chief Distribution Officer
Yap Foo Vee
Head, Technical Operations
Chong Kah Lay
Head, General Operations
Tang Yoke Kuen
Head, Claims Management
Great Eastern Takaful Sdn Bhd
Zafri Ab Halim
Chief Executive Officer
and Chief Financial Officer
Shizal Fisham Ramli
Head, Actuarial & Product
Ariff Azhan Abd Ghani
Head, Agency Distribution
Mohd Hanafi Mohd Isa
Head, Partnership Distribution
Mohd Hafiz Johari
Head, Human Capital
Wan Ahmad Najib Wan Ahmad Lotfi
Head, Strategic Management & Shariah
Shapini Abdul Halim
Head, Legal & Secretarial
INDONESIA
PT Great Eastern Life Indonesia
Ivan Chak
Chief Executive Officer
Windawati Tjahjadi
Chief Financial Officer
Yannes Chandra
Chief Information Technology Officer
Gary Chuang Peck San
Chief Distribution Officer
Ang Chee Leong
Chief Agency Officer
Francis Seo
Head, Bancasurrance
Yungki Aldrin
Head, Human Capital
Bachtiar
Head, Operations
Sariniatun
Head, Risk Management & Compliance
VIETNAM
Great Eastern Life (Vietnam) Co Ltd
Laurence Wong Yuen Tin
Chief Executive Officer
Ong Khai Sheong
Chief Operations Officer
Lao Tri Duong
Chief Agency Officer
Lee Kok San
Appointed Actuary
Huynh Kim Tu
Head, Finance & Investment
Nguyen Hoang Thuy Trang
Head, Marketing
& Corporate Communications
CHINA
Beijing Representative Office
Ji Chunyan
Chief Representative
BRUNEI
Caroline Sim
Acting Head
200 ANNUAL REPORT 2012 [ MORE TO LIFE ]
GROUPNETWORK
SINGAPORE
Great Eastern Holdings Limited
The Great Eastern Life Assurance
Company Limited
The Overseas Assurance
Corporation Limited
1 Pickering Street #13-01
Great Eastern Centre
Singapore 048659
Tel: +65 6248 2000
Fax: +65 6532 2214
Website: greateasternlife.com
E-mail: [email protected]
Service Centres for Distribution RepresentativesGreat Eastern @ Changi
200 Changi Road #01-03
Singapore 419734
Great Eastern House
49 Beach Road #01-01
Singapore 189685
Great Eastern Financial Advisers
Private Limited
1 Pickering Street #13-01
Great Eastern Centre
Singapore 048659
Tel: +65 6248 2121
Fax: +65 6327 3073
Website: www.greateasternfa.com.sg
E-mail: [email protected]
Lion Global Investors Limited
65 Chulia Street #18-01
OCBC Centre
Singapore 049513
Tel: +65 6417 6800
Fax: +65 6417 6801
Website: www.lionglobalinvestors.com
E-mail: [email protected]
MALAYSIA
Great Eastern Life Assurance
(Malaysia) Berhad
Menara Great Eastern
303 Jalan Ampang
50450 Kuala Lumpur
Malaysia
Tel: +603 4259 8888
Fax: +603 4259 8000
Website: greateasternlife.com
E-mail: [email protected]
Branch Offices
Alor Setar66 & 68 Jalan Teluk Wanjah
05200 Alor Setar, Kedah
Malaysia
Fax: +604 731 9878
Batu Pahat109, Jalan Rahmat
83000 Batu Pahat, Johor
Malaysia
Fax: +607 432 5560
BintuluNo. 313, Lot 3956, Phase 4
Bintulu Parkcity Commercial Square
Jalan Tun Ahmad Zaidi/Jalan Tanjung
Batu
97000 Bintulu, Sarawak
Malaysia
Fax: +6086 332 601
IpohWisma Great Eastern
No 16, Persiaran Tugu
Greentown Avenue
30450 Ipoh, Perak
Malaysia
Fax: +605 255 5578
Johor Bahru10th Floor, Menara Pelangi
Jalan Kuning, Taman Pelangi
80400 Johor Bahru, Johor
Malaysia
Fax: +607 334 9122
KlangNo. 8 & 10 Jalan Tiara 2A
Bandar Baru Klang
41150 Klang, Selangor
Malaysia
Fax: +603 3341 3398
KluangNo. 22 & 24
Jalan Md Lazim Saim
86000 Kluang, Johor
Malaysia
Fax: +607 772 3449
Kota BharuNo. S25 / 5252 – T&U
Jalan Sultan Yahya Petra
15200 Kota Bharu, Kelantan
Malaysia
Fax: +609 744 9701
Kota KinabaluWisma Great Eastern
Level 4 & 5
No. 65 Jalan Gaya
88000 Kota Kinabalu, Sabah
Malaysia
Fax: +6088 210 437
2nd Floor, 6F
Bangunan Persatuan Hin Ann
Jalan Air Jernih
20300 Kuala Terengganu, Terengganu
Malaysia
Fax: +609 626 5195
KuantanA25 Jalan Dato Lim Hoe Lek
25200 Kuantan, Pahang
Malaysia
Fax: +609 515 8477
201GREAT EASTERN HOLDINGS LIMITED
GROUPNETWORK
KuchingHouse No. 51, Lot 435, Section 54
KTLD, Travilion Commercial Centre
Jalan Padungan
93100 Kuching, Sarawak
Malaysia
Fax: +6082 426 684
Ground & 1st Floor
MDLD 0819, Jalan Teratai
91100 Lahad Datu, Sabah
Malaysia
Fax: +6089 884 226
No.23 Jalan PM 15
Plaza Mahkota
75000 Melaka
Malaysia
Fax: +606 283 4579
MiriLots 1260 & 1261, Block 10
M.C.L.D, Jalan Melayu
98000 Miri, Sarawak
Malaysia
Fax: +6085 417 518
Penang25, Light Street
10200 Penang
Malaysia
Fax: +604 262 2140
Lot 5 & 6, Block 40
Lorong Indah 15
Bandar Indah, Phase 7
Mile 4, North Road
90000 Sandakan, Sabah
Malaysia
Fax: +6089 271 343
Seremban101 & 103 Jalan Yam Tuan
70000 Seremban
Negeri Sembilan
Malaysia
Fax: +606 763 1480
SibuNo. 10 A-F, Wisma Great Eastern
Persiaran Brooke
96000 Sibu, Sarawak
Malaysia
Fax: +6084 333 925
60 Jalan Barrack
34000 Taiping, Perak
Malaysia
Fax: +605 805 1023
Ground Floor, Wisma Great Eastern
Jalan Billian
91000 Tawau, Sabah
Malaysia
Fax: +6089 762 341
Overseas Assurance Corporation
(Malaysia) Berhad
Level 18, Menara Great Eastern
303 Jalan Ampang
50450 Kuala Lumpur
Malaysia
Tel: +603 4259 7888
Fax: +603 4813 2737
Website: www.oac.com.my
E-mail: [email protected]
Branch Offices
Level 18, Menara Great Eastern
303 Jalan Ampang
50450 Kuala Lumpur
Malaysia
Tel: +603 4259 7888
Fax: +603 4813 0088
17-21, Jalan Medan Tuanku Satu
Medan Tuanku
50300 Kuala Lumpur
Tel: +603 2786 1000
Fax: +603 2713 6001
Alor SetarLevel 1, 69 & 70
Jalan Teluk Wanjah
05200 Alor Setar, Kedah
Malaysia
Tel: +604 734 6515
Fax: +604 734 6516
IpohLevel 2, Wisma Great Eastern
No.16, Persiaran Tugu
Greentown Avenue
30450 Ipoh, Perak
Malaysia
Tel: +605 253 6649
Fax: +605 255 3066
Johor BahruSuite 13A-1, Level 13A
Menara Pelangi
Jalan Kuning, Taman Pelangi
80400 Johor Bahru, Johor
Malaysia
Tel: +607 334 8988
Fax: +607 334 8977
Klang3rd Floor, No. 10 Jalan Tiara 2A
Bandar Baru Klang
41150 Klang, Selangor
Malaysia
Tel: +603 3345 1027
Fax: +603 3345 1029
Kota BharuNo. S25 / 5252-S Tingkat 1
Jalan Sultan Yahya Petra
15200 Kota Bharu, Kelantan
Malaysia
Tel: +609 748 2698
Fax: +609 744 8533
Kota KinabaluSuite 6.3, Level 6
Wisma Great Eastern Life
No. 65 Jalan Gaya
88000 Kota Kinabalu, Sabah
Malaysia
Tel: +6088 235 636
Fax: +6088 248 879
202 ANNUAL REPORT 2012 [ MORE TO LIFE ]
GROUPNETWORK
KuantanLevel 1, No. 25, Jalan Dato’ Lim
Hoe Lek
25000 Kuantan, Pahang
Malaysia
Tel: +609 516 2849
Fax: +609 516 2848
KuchingNo. 51, Level 3, Wisma Great Eastern
Lot 435, Section 54 KTLD
Travilion Commercial Centre
Jalan Padungan
93100 Kuching, Sarawak
Malaysia
Tel: +6082 420 197
Fax: +6082 248 072
No. 2-23, Jalan PM 15
Plaza Mahkota
75000 Melaka
Malaysia
Tel: +606 284 3297
Fax: +606 283 5478
PenangSuite 2-3 Level 2
Wisma Great Eastern
25 Lebuh Light
10200 Penang
Malaysia
Tel: +604 261 9361
Fax: +604 261 9058
Seremban103-2 Jalan Yam Tuan
70000 Seremban
Negeri Sembilan
Malaysia
Tel: +606 764 9082
Fax: +606 761 6178
SibuLevel 2, No. 10 A-F
Wisma Great Eastern
Persiaran Brooke
96000 Sibu Sarawak
Tel: +6084 328 392
Fax: +6084 326 392
Great Eastern Takaful Sdn Bhd
Level 3, Menara Great Eastern
303 Jalan Ampang
50450 Kuala Lumpur
Malaysia
Tel: +603 4259 8338
Fax: +603 4259 8808
Website: www.i-great.com
Email: [email protected]
INDONESIA
PT Great Eastern Life Indonesia
Menara Karya, 5th Floor
Jl. H.R. Rasuna Said Blok X-5 Kav.1-2
Jakarta 12950
Indonesia
Tel: +6221 2554 3888
Fax: +6221 5794 4717
Website: greateasternlife.com
Email: [email protected]
PT Great Eastern Life Indonesia has
a Syariah Unit in Jakarta.
Sales Offices
Menara Prima 17th Floor
Jl. Lingkar Mega Kuningan Blok 6.2
Jakarta 12950
Tel: +6221 5794 8341 / 42
Fax: +6221 5794 8340
BandungJl. Gatot Subroto No. 91 A
Bandung 40262
Tel: +6222 732 2890
Fax: +6222 732 2910
Jl. Raya Magelang No. 6, Jetis
Yogyakarta 55233
Tel: +62274 585 494
Fax: +62274 553 298
Email: [email protected]
SurabayaJl. Raya Gubeng No 24
Surabaya 60281
Tel: +6231 505 1155
Fax: +6231 505 1166
MedanKompleks Taman Juanda Blok D
Jl. Juanda No. 16-I
Medan 20157
Tel: +6261 451 1710
Fax: +6261 452 0988
Jl. Jend. Sudirman No. 498 A/B
Kel. Wonorejo, Kec. Sukajadi
Pekanbaru
Tel: +62761 27 343
Fax: +62761 789 1615
Email: [email protected]
JambiJl. Gatot Subroto No. 8
Kel. Sungai Asam, Kec. Pasar Jambi
Jambi 36134
Tel: +62741 24 231
Fax: +62741 31 845
Email: [email protected]
BatamRuko Nagoya Hill, Blok R4 – D9
Mall Nagoya Hill, Nagoya Centre
Batam 29444
Tel: +62778 749 3952 / 53
Fax: +62778 749 3951
Email: [email protected]
PalembangKomp. Ruko Balayudha
Jl. Jend. Sudirman No. 6
Palembang
Sumatera Selatan 30128
Tel: +62711 411 098
Fax: +62711 411 435
Email: [email protected]
203GREAT EASTERN HOLDINGS LIMITED
GROUPNETWORK
DenpasarJl. Gatot Subroto Tengah No. 85 XX
Kel. Tonja, Kec. Denpasar Utara
Tel: +62361 895 7075 / 76
Fax: +62361 239 983
Email: [email protected]
Ruko Metro Square No. F 11
Jl. Veteran Utara
Makassar 90153
Tel: +62411 361 9658 / 362 7929
/ 362 8082
Fax: +62411 319 836
Email: [email protected]
PapuaJl. Raya Abepura Entrop No. 8
Jayapura, Papua
Tel: +62967 551 732
Fax: +62967 551 732
VIETNAM
Great Eastern Life (Vietnam) Co Ltd
HD Tower, Level 8
25 Bis Nguyen Thi Minh Khai Street
District 1, Ho Chi Minh City
Vietnam
Tel: +848 6288 6338
Fax: +848 6288 6339
Website: greateasternlife.com
E-mail: [email protected]
Hanoi BranchViet Tower, Level 11
1 Thai Ha Street,
Dong Da District, Hanoi
Vietnam
Tel: +844 3938 6757
Fax: +844 3936 3902
Sales Office
Tan Da Court, Level M
86 Tan Da, District 5
Ho Chi Minh City
Vietnam
Tel: +848 6256 3688
Fax: +848 6256 3689
CHINA
The Great Eastern Life Assurance
Company Limited
Beijing Representative Office
No. 26 North Yue Tan Street
Heng Hua International Business Centre
710A
Beijing Xi Cheng District
Beijing 100045
People’s Republic of China
Tel: +8610 5856 5501
Fax: +8610 5856 5502
Great Eastern Life Assurance
(China) Company Ltd
22nd - 27th Floor, Block B1
Street No. 92, Xinguang Avenue
Beibu New District
Chongqing 401121
People’s Republic of China
Tel: +8623 6381 6666
Fax: +8623 6388 5566
Website: www.lifeisgreat.com.cn
E-mail: [email protected]
Chongqing Branch17th Floor, Dushi Square
No. 39 Wusi Road
Yuzhong District
Chongqing 400010
People’s Republic of China
Tel: +8623 6805 9999
Fax: +8623 6805 3100
Sichuan Branch22nd Flr, Building C of Fortune Centre
No. 6 Daye Road
Jinjiang District, Chengdu
Sichuan 610000
People’s Republic of China
Tel: +8628 6559 7666
Fax: +8628 6557 0060
Shaanxi Branch7th Floor, Jin Ding Building,
No. 116, Heping Road
Beilin District, Xi’an
Shaanxi 710001
People’s Republic of China
Tel: +8629 6893 1888
Fax: +8629 6893 1999
Hubei Branch1st / 8th Floor of Guozi Building
No. 32, Tangjiadun Road
Jianghan District, Wuhan
Hubei 430024
People’s Republic of China
Tel: +8627 5982 9300
Fax: +8627 5982 9399
BRUNEI
Great Eastern Life Assurance Co Ltd
Unit 17/18, Block B
Bangunan Habza
Spg 150, Kpg. Kiarong
Bandar Seri Begawan BE1318
Negara Brunei Darussalam
Tel: +6732 23 3118
Fax: +6732 23 8118
Website: greateasternlife.com
E-mail: [email protected]
204 ANNUAL REPORT 2012 [ MORE TO LIFE ]
NOTICE OFANNUAL GENERAL MEETING
GREAT EASTERN HOLDINGS LIMITED
(INCORPORATED IN THE REPUBLIC OF SINGAPORE)
(COMPANY REGISTRATION NO. 199903008M)
NOTICE IS HEREBY GIVEN that the Fourteenth Annual General Meeting of Great Eastern Holdings Limited (the “Company”) will be
held at 1 Pickering Street #02-02, Great Eastern Centre, Singapore 048659 on Wednesday, 17 April 2013 at 3.00 pm to transact
the following business:
AS ORDINARY BUSINESS
1 To receive and adopt the Directors’ Report and the audited Financial Statements for the financial year ended 31 December
2012.
2 To approve a final tax exempt (one-tier) dividend of 27 cents per ordinary share and a special tax exempt (one-tier) dividend
of 27 cents per ordinary share in respect of the financial year ended 31 December 2012.
3(a) To re-appoint pursuant to Section 153(6) of the Companies Act, Chapter 50, the following Directors, to hold office from the
date of this Annual General Meeting until the next Annual General Meeting:
(i) Dr Cheong Choong Kong
(ii) Mr Tan Yam Pin
considered an independent member of the Audit Committee.
(b) To re-elect the following Directors retiring by rotation under Article 91 of the Company’s Articles of Association and, who
being eligible, offer themselves for re-election:
(i) Mr Norman Ip
(ii) Mr Lee Chien Shih
an independent member of the Audit Committee.
(c) To re-elect Mr Law Song Keng retiring under Article 97 of the Company’s Articles of Association and, who being eligible,
offers himself for re-election.
considered an independent member of the Audit Committee.
4 To approve Directors’ fees of $1,905,000 for the financial year ended 31 December 2012 (2011: $1,995,000).
5 To re-appoint Messrs Ernst & Young LLP as Auditor and authorise the Directors to fix their remuneration.
205GREAT EASTERN HOLDINGS LIMITED
NOTICE OFANNUAL GENERAL MEETING
AS SPECIAL BUSINESS
6 To consider and, if thought fit, to pass the following Resolution as an Ordinary Resolution to empower the Directors to issue
shares in the Company and to make or grant instruments (such as warrants or debentures) convertible into shares, and to
issue shares in pursuance of such instruments, up to the limit specified therein from the date of this Annual General Meeting
up to the next Annual General Meeting.
Mandate to issue shares
That authority be and is hereby given to the Directors of the Company to:
(a) (i) issue shares in the capital of the Company (“shares”) whether by way of rights, bonus or otherwise; and/or
(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be
issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures or
other instruments convertible into shares,
on a pro rata basis to shareholders of the Company, at any time and upon such terms and conditions and for such
purposes as the Directors may in their absolute discretion deem fit; and
(b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance
of any Instrument made or granted by the Directors while this Resolution was in force,
provided that:
(1) the aggregate number of shares to be issued pursuant to this Resolution (including shares to be issued in pursuance
of Instruments made or granted pursuant to this Resolution) shall not exceed 50% of the total number of issued shares
in the capital of the Company excluding treasury shares (as calculated in accordance with sub-paragraph (2) below);
(2) (subject to such manner of calculation and adjustments as may be prescribed by the Singapore Exchange Securities
Trading Limited (“SGX-ST”) for the purpose of determining the aggregate number of shares that may be issued under
sub-paragraph (1) above, the total number of issued shares in the capital of the Company excluding treasury shares
shall be based on the total number of issued shares in the capital of the Company excluding treasury shares at the
time this Resolution is passed, after adjusting for:
(i) new shares arising from the conversion or exercise of any convertible securities or share options or vesting of
share awards which are outstanding or subsisting at the time this Resolution is passed; and
(ii) any subsequent bonus issue, consolidation or subdivision of shares;
(3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing
Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the
Articles of Association for the time being of the Company; and
(4) (unless revoked or varied by the Company in general meeting) the authority conferred by this Resolution shall continue
in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual
General Meeting of the Company is required by law to be held, whichever is the earlier.
206 ANNUAL REPORT 2012 [ MORE TO LIFE ]
NOTICE OFANNUAL GENERAL MEETING
7 That authority be and is hereby given to the Directors of the Company to allot and issue from time to time such number of
shares as may be required to be allotted and issued pursuant to the Great Eastern Holdings Limited Scrip Dividend Scheme.
8 To transact any other ordinary business.
By Order of the Board
JENNIFER WONG PAKSHONG
Secretary
Singapore
27 March 2013
207GREAT EASTERN HOLDINGS LIMITED
NOTICE OFANNUAL GENERAL MEETING
EXPLANATORY NOTES
Ordinary Resolution in item 6
The Ordinary Resolution set out in item 6 authorises the Directors of the Company from the date of the forthcoming Annual General
Meeting until the next Annual General Meeting to issue shares in the capital of the Company and to make or grant instruments
(such as warrants or debentures) convertible into shares on a pro rata basis to shareholders of the Company, and to issue shares
in pursuance of such instruments, up to a number not exceeding 50% of the total number of issued shares in the capital of the
Company excluding treasury shares. For the purpose of determining the aggregate number of shares that may be issued, the total
number of issued shares in the capital of the Company excluding treasury shares shall be based on the total number of issued
shares in the capital of the Company excluding treasury shares at the time this proposed Ordinary Resolution is passed, after
adjusting for (a) new shares arising from the conversion or exercise of any convertible securities or share options or vesting of
share awards which are outstanding or subsisting at the time this proposed Ordinary Resolution is passed, and (b) any subsequent
bonus issue, consolidation or subdivision of shares. For the avoidance of doubt, any consolidation or subdivision of shares in
the capital of the Company will require shareholders’ approval. The Directors will only issue shares under this Resolution if they
consider it necessary and in the interests of the Company.
Ordinary Resolution in item 7
The Ordinary Resolution set out in item 7 authorises the Directors of the Company to issue shares pursuant to the Great Eastern
Holdings Limited Scrip Dividend Scheme to members who, in respect of a qualifying dividend, have elected to receive scrip in lieu
of the cash amount of that qualifying dividend.
Note: A member of the Company entitled to attend and vote at the above Meeting may appoint a proxy to attend and vote on his behalf. Such proxy need not be a member of the Company. The instrument appointing a proxy must be deposited at the
BOOKS CLOSURE DATE AND PAYMENT DATE FOR DIVIDENDS
Subject to the approval of the shareholders to the final and special tax exempt (one-tier) dividends at the Annual General Meeting,
the Share Transfer Books and Register of Members of the Company will be closed on 26 April 2013 for the purpose of determining
the entitlement of shareholders to the recommended final tax exempt (one-tier) dividend of 27 cents per ordinary share and special
tax exempt (one-tier) dividend of 27 cents per ordinary share. Duly completed registrable transfers of shares received by the
Company’s Share Registrar, M & C Services Pte Ltd at 112 Robinson Road #05-01, Singapore 068902 up to 5.00 pm on 25 April
2013 will be registered to determine shareholders’ entitlements to the proposed dividends. Subject to the aforesaid, Members
whose securities accounts with The Central Depository (Pte) Limited are credited with shares as at 5.00 pm on 25 April 2013 will
be entitled to the proposed dividends.
The final and special tax exempt (one-tier) dividends, if approved by shareholders, will be paid on 9 May 2013.
208 ANNUAL REPORT 2012 [ MORE TO LIFE ]
209GREAT EASTERN HOLDINGS LIMITED
PROXY FORM IMPORTANT:
1. For investors who have used their CPF monies to buy Great
Eastern Holdings Limited shares, this Annual Report is sent solely
FOR INFORMATION ONLY.
2. This Proxy Form is not valid for use by CPF investors and shall be
ineffective for all intents and purposes if used or purported to be
used by them.
GREAT EASTERN HOLDINGS LIMITED
(INCORPORATED IN THE REPUBLIC OF SINGAPORE)
(COMPANY REGISTRATION NO. 199903008M)
I/We,_________________________________________________________________________________________________________
NRIC/Passport No._______________________of____________________________________________________________________
_____________________________________________________________________________________________________________
being a member/members of Great Eastern Holdings Limited, hereby appoint
Name Address NRIC/Passport No.Proportion of
Shareholdings (%)
and/or (delete as appropriate)
as my/our proxy/proxies to attend and vote for me/us and on my/our behalf at the Annual General Meeting of the Company to be
held at 1 Pickering Street #02-02, Great Eastern Centre, Singapore 048659 on Wednesday, 17 April 2013 at 3.00 pm and at any
adjournment thereof.
I/We have indicated with an “X” in the appropriate box against such item how I/we wish my/our proxy/proxies to vote. If no specific
direction as to voting is given, or in the event of any item arising not summarised below, my/our proxy/proxies may vote or abstain
at the discretion of my/our proxy/proxies.
No. Resolutions For Against
AS ORDINARY BUSINESS
1 Adoption of Directors’ Report and 2012 Audited Financial Statements
2
4
5remuneration
AS SPECIAL BUSINESS
6
Scrip Dividend Scheme
Dated this ___________ day of __________________ 2013
_____________________________________
Signature(s) of Member(s) or Common Seal
IMPORTANT: PLEASE READ NOTES OVERLEAF.
Total Number of Shares held
210 ANNUAL REPORT 2012 [ MORE TO LIFE ]
NOTES TO PROXY FORM:
1. (a) A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two
proxies to attend and vote on his behalf. Such proxy need not be a member of the Company.
(b) Completion and return of this instrument appointing a proxy shall not preclude a member from attending and voting at
the meeting. Any appointment of a proxy or proxies shall be deemed to be revoked if a member attends the meeting
in person.
2. The instrument appointing a proxy or proxies must be deposited at the Company’s registered office at 1 Pickering Street
#16-01, Great Eastern Centre, Singapore 048659, not less than 48 hours before the time fixed for holding the Annual
General Meeting.
3. Where a member appoints two proxies, the appointments shall be invalid unless he specifies the proportion of his shareholding
(expressed as a percentage of the whole) to be represented by each proxy.
4. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository
Register (as defined in Section 130A of the Companies Act, Chapter 50), you should insert that number of shares. If you
have shares registered in your name in the Register of Members, you should insert that number of shares. If you have shares
entered against your name in the Depository Register and shares registered in your name in the Register of Members, you
should insert the aggregate number of shares entered against your name in the Depository Register and registered in your
name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed
to relate to all the shares held by you.
5. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in
writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under
its seal or under the hand of a director or an officer or attorney duly authorised.
6. Where an instrument appointing a proxy or proxies is signed on behalf of the appointor by an attorney, the letter of power of
attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument
of proxy, failing which the instrument may be treated as invalid.
7. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks
fit to act as its representative at the Annual General Meeting, in accordance with Section 179 of the Companies Act, Chapter
50.
8. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed
or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified
in the instrument appointing a proxy or proxies. In addition, in the case of shares entered in the Depository Register, the
Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown
to have shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the
Annual General Meeting, as certified by The Central Depository (Pte) Limited to the Company.
GREAT EASTERN HOLDINGS LIMITED(Incorporated in the Republic of Singapore)(Company Reg. No. 199903008M)
1 Pickering Street #13-01Great Eastern Centre Singapore 048659
Tel: +65 6248 2000 Fax: +65 6532 2214Website: greateasternlife.comE-mail: [email protected]